How to Invest in High-Interest Fixed Deposits for the First Time?

By Akshay Sharma December 6, 2018 Finance

Fixed Deposit (FD) has been popular from last few decades due to its high-end security and assured returns. In fact, the increase in interest rates recently has enhanced the popularity of the investment vehicle. Additionally, the increase in volatility of the stock markets and the descending inflation rate has made investors choose FD for a fixed return.
No investment is completely risk-free, and therefore it is important to choose a perfect blend of safe and risky investment. FD is the right choice for such an investment. In an FD, you need to deposit a lump sum amount in an FD account. After a fixed tenor, you will receive the principal amount along with a set rate of interest.
Banks and Non-Banking Financial Companies (NBFCs) provide the facility to open an FD account. However, it is advised to invest in an NBFC to gain high interest rates.

Benefits of an FD

Guaranteed Returns
Since fixed deposits are not subject to market risks, you can assure to receive assured returns on your investments in an FD.

High FD Interest Rates
Compared to a standard savings account, you can yield high interest rates from an FD account. At present, Bajaj Finance, one of the prominent financial provider, offers the highest interest rate up to 9.10%. However, the rate of interest depends on factors like the type of customer, principal deposit, tenor, and frequency of the interest payout.

Flexibility in Tenor
Irrespective of the financial provider you choose, you get an option to select the tenor of your FD from 12 months to 60 months. Although, this tenor can vary among the financial providers.

Option to Choose the Type of FD
There are two types of FD based on the interest payouts viz. Cumulative FD and Non-Cumulative FD. In a cumulative FD, the interest is paid in a lump sum after one year or at maturity. In a non-cumulative FD, the interest is paid at a monthly, quarterly, half-yearly, or yearly basis.

Loan against FD
To avoid penalty charges for premature withdrawals, many financial providers offer the facility to take a loan against your FD. Usually, you get to use up to 90% of your funds with comparatively lower interest rates than the traditional loans.

Minimal Documentation
With advanced technologies adapted by Bajaj Finance, the number of documents required is reduced significantly for your convenience. You can also submit the documents online and apply for an FD instantly.

FD Calculator
You can calculate the returns using the online FD calculator easily available on the website of your financial provider.

Tips to Invest in High-Interest Fixed Deposits

Choose an NBFC
It is a known fact that NBFCs are no more risky with the introduction of credit rating. You can easily check the ranking of the financial institution you wish to invest in and decide the reliability of the company. Bajaj Finance is rated as FAAA by CRISIL and MAAA by ICRA which is the highest rating given to a financial provider.

Go for a Cumulative FD
Cumulative FD can gain you more interest rate compared to a non-cumulative FD. Due to this reason, it is suggested to opt for a cumulative FD. If you wish for liquidity from your investments, you can choose to ladder your investments. FD laddering is a process wherein you distribute your principal deposit amount into multiple FDs with different tenors to maintain liquidity.

Opt for Fixed Interest Rates
You get to choose the type of interest rate applied to your FD from fixed and fluctuating. If you choose fixed interest rate, you will get assured returns of your investment. If you choose a floating interest rate with the view to gain high interest rate FD with the increase in market rates, your returns will be volatile.

Avoid Making Pre-Mature Withdrawals
Pre-mature withdrawals attract penalty. Although you are free to make pre-mature withdrawals, it is ideal to avoid it as it can deduct a decided amount from your interest payout. In case of emergencies, you can always take a loan against FD. With Bajaj Finance, you can avail your loan amount within a day after application with quick processing.