Your guide to learning how to use a Fixed Deposit calculator
A fixed deposit investment provides high safety for your investment; however, the returns are not the most exciting as the fixed deposit interest rates are lower than other market investments, which come bundled with higher risks. In these conditions any change in the interest rate, tenure or cumulative/non-cumulative deposit options will change your earnings. A quick way to understand your earnings with every change is to use the handy online fixed deposit calculator. Here is how to use one.
Step 1: Choose Between a New Customer or Existing Loan Customer or Senior Citizen
Many NBFCs offer online FD accounts. A customer can set up a fixed deposit account online without taking the time and trouble to visit a lender or stand in queue to secure this basic investment. The rate of interest varies between new customers, existing customer and the interest offered to a senior citizen. While the new customer gets a rate better than market rates, a return customer is provided an incentive while a senior citizen usually gets about half a percentage more as interest.
Step 2: Choose Between A ‘Cumulative’ And ‘Non-Cumulative’ Deposit Option
First, let’s understand these terms:
A ‘non-cumulative’ fixed deposit provides a regular interest payout throughout the tenure of the fixed deposit. The interest can be received monthly, quarterly, half yearly or annually. A ‘non-cumulative’ fixed deposit is typically taken by investors who use the interest earnings to pay for general expenses. Investors with non-cumulative FD accounts usually use the interest earnings to pay EMIs on other loans.
A ‘cumulative’ fixed deposit comes with no intra-term interest payment during the term of the fixed deposit. The interest is paid along with the principle at the end of the term of the deposit, otherwise known as maturity. For maximising your returns, it is best to choose a cumulative fixed deposit. The interest earned can also be capitalised for the next fixed deposit enabling you to earn more. Those investors who do not require the interest earnings to meet day-to-day expenses or EMIs generally use a cumulative fixed deposit.
Step 3: Principal or Fixed Deposit Amount
Next, you will be asked to fill out the amount for which you want to open the fixed deposit. While there is no limit on this amount, it is important to consider the following points:
- Consider breaking your large fixed deposit principal amount into smaller amounts. This will help reduce the loss of earnings in case you are in need of quick cash. When cash is required, you will be able to get the liquidity required by converting one of the smaller fixed deposits instead of converting the large deposit.
- Do your homework to ensure that you can manage your finances after having set aside the principal in a fixed deposit. While it is easy to liquidate the deposit, your earnings will be limited in case you break the FD before its maturity.
Step 4: Rate of Interest:
Each bank or financial institution has its own FD interest rate card. So you need to shop for the best interest on offer while ensuring the safety of your investment. It is important to note that the rate of interest will vary with the tenure of the fixed deposit. Please note that with the interest being calculated in the number of days, on occasion, increasing the tenure by one day can increase the rate of interest by 0.5%. Keep these factors in mind as you finalise your fixed deposit. Also remember that senior citizens are offered a higher rate of return.
Step 5: Tenure of The Investment
Finally, the last step is the tenure of the fixed deposit. Once again there is no minimum or maximum limit. It is prudent to choose the tenure based on your financial goals considering when the money on fixed deposit will be required. As this is a very liquid investment, you will have access to the money invested easily when required.
Once you have entered the above details into the fixed deposit calculator, the calculator will generate the maturity value of the fixed deposit and also show the interest earnings over the duration of the fixed deposit.
While fixed deposit calculators are plenty online, use the one at Bajaj Finance Limited as it is easy to use, quick and accurate. Bajaj Finance also provides various fixed deposit schemes keeping your financial goals in mind. With a high safety rating and over 200 points of contact they are easy to reach offline as well.