Fixed deposits are one of the most preferred methods of investing money in India. This is best suited for conservative investors who don't want to take any sort of risk and are happy with moderate returns only.
Benefits of investing in Fixed Deposits:
Fixed deposits or term deposits is one of the most secure investments. On maturity the depositor will get the principal plus the interest earned during the tenure of the deposit.
Even in case of default by the bank, which may happen in the rarest of cases, you are assured of getting back any deposit up to Rs 1 lakh. Bank deposits are guaranteed by the Deposit Insurance and Credit Guarantee Corporation.
Fixed deposits offer assured returns. Once the money is deposited, the bank has to pay the interest rate agreed at the start. Even if interest rates fall before the deposit matures, returns will not decrease. So, depositors know exactly how much they will get when the deposit matures at the time of locking into the deposit. Similarly, if interest rates rise during the maturity, returns will not increase. But banks will give the option of breaking the deposit before maturity and re-investing in a new deposit at higher rates.
The tenure for a FD can range from as one month to 10 years. You can choose the tenure depending on your needs and goals.
Fixed deposits can be redeemed anytime.
Fixed deposits offer loan facility under which you can get up to 90% of the deposit amount as loan. The interest rate for the loan works out cheaper than a personal loan.