Investing in fixed deposit schemes is extremely popular among Indians. In order to get the best returns, people are always searching for the best fixed deposit schemes being offered by banks. Apart from banks, there are also some institutions that offer fixed deposit facility such as NBFCs, housing finance companies, cooperative banks and small finance banks.
But before investing in these schemes, you must consider the following factors:
The following are the factors to consider before applying for an FD:
Rate of interest paid: One of the most important things to consider before opting for a FD scheme is the rate of interest that is being offered. All investors must compare FD interest rates and choose a good deal.
Credibility of FD provider: Do not just go for the FD with the highest interest rate. There are other factors that also need to be considered like the credibility of the organization that is offering the term deposit. Preferably, go for ‘A’ rated schemes and consider ratings from organizations like ICRA and CRISIL.
Tenure: The interest rates of the fixed deposits vary with its tenure. You must also check in the lock-in period of your Fixed deposit. You will get a higher rate of interest if the deposit is done for a longer duration. Fixed deposit tenures are known to vary in the range of 7 days to 10 years
Interest compounding frequency: Find out how the interest is calculated on your investment. If you choose to reinvest the interest that you earn, total return on the investment will be much higher.
Interest payout option: Before investing, you must check whether your FD is giving you a wide range of interest payout options. Also, keeping a check on the frequency of interest payouts is necessary. Payments are made monthly, quarterly, annually or half-yearly in many cases thus you must check the frequency of interest.
Premature withdrawal: Many times, due to a certain situation, you may want to break our FD before the maturity date. So, before investing in FD, you must check whether you will be levied any penalty charges if you break your FD before maturity. After analyzing, you can make the decision to invest.
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