How To Calculate FD Interest Earnings: Understand How It Works
There are several investment options in the market, and if we are not familiar with them, we generally end up choosing what is popular or what a friend or a colleague suggests. This might not prove to be the best way to grow your hard-earned money. As needs and aspirations differ from person to person, your investment goals will not be similar to your friend’s. So before making any investment, it is crucial to understand what exactly you will gain out of it; whether it aligns to your goals or not.
Unlike stocks and market-related investments, fixed deposits have a predetermined rate of return, which can be easily calculated and predicted. This makes fixed deposits a highly safe and stable investment Plan.
How to Calculate Fixed Deposit(FD) interest rate?
While calculating the interest rate on your FD, the factors that are taken into account are:
- Tenor – the Time period for which you will be investing
- Principal – The base amount that you deposit, on which the interest will be calculated
- Payout – The frequency you decide for receiving the interest – monthly, quarterly, half-yearly or annually
- Type of fixed deposit – Interest rates will vary depending on whether you go for cumulative or non-cumulative FD. Cumulative FD is where you receive the interest-only at the time of maturity, while in non-cumulative FD you choose the time of periodical payouts. Cumulative FDs give higher returns than non-cumulative ones.
The formula to calculate the interest rate and maturity amount of an FD is –
M = P (1 + r/n) ^ (nt)
M stands for Maturity amount;
P is Principal or Deposit amount;
r is the Rate of interest;
n is the Number of times the interest is compounded;
t is the Tenor.
This process is simplified by various free online calculators like the FD Calculator on the Bajaj Finserv website. Here’s how to use it:
- Choose the “Customer Type” – From options like New, Returning, Senior Citizen, Employee, select the category you fall in. In Bajaj Finance FD, returning customers and employees of Bajaj enjoy an additional 0.25%, while senior citizens get an additional 0.35% interest in creating an FD.
- Choose the “Investment Type” – Cumulative or Non-Cumulative. As explained earlier, cumulative depositors are rewarded with a higher interest rate for locking in their money for a longer period of time.
- Enter “Principal” – The amount you wish to invest
- Select “Tenor” – The time period of your investment
The best advantage of an online calculator is that with just a few clicks, you can instantly check fixed deposit interest rates in 2019 for different principal amounts and tenors to make an informed decision. To get the most out of your investments, it is also important to choose the right fixed deposit service provider. With some of the best interest rates in 2019, Bajaj Finance FD is a great choice. Bajaj Finance FD is an NBFC (Non-Banking Financial Company) providing fixed deposits with high interests of up to 8.35% to normal citizens and up to 8.70% to senior citizens. Excellent ICRA and CRISIL ratings speak for the security and stability ensured by Bajaj Finance FD. There are various other benefits of investing in Bajaj Finance FD, such as:
- Flexibility to choose periodic interest payouts
- Loan against FD facility
- Multi-deposit facility
- Auto-renewal feature