With the numerous options available in the market, do you get confused about how much investment you must make in fixed deposits? Do you find it challenging to find the right balance or the tenure for which you must invest your money in FDs? If yes, worry not! An FD interest calculator is all that you need. These calculators will help you in making an informed investment decision. Keep scrolling through to know the details regarding the FD interest calculator.
But before we get to that, let’s understand the basics of a fixed deposit.
Fixed deposits are the investment options that banks and NBFCs offer. It is a term deposit that can be made for a higher interest rate. The money in fixed deposits can be invested for a fixed term ranging from 7 days to 10 years. Once the money is invested, you can only withdraw it at maturity. These deposits are also referred to as term deposits and are one of the safest investment options.
SIP is another popular investment option that one can opt for. The basic difference between fixed deposit and SIP is that the former invites a one-time deposit, SIP invites regular deposits. You can use SIP calculator online to estimate your returns.
Now that we know what a fixed deposit is, let’s understand how a fixed deposit interest calculator can save the day.
What is a Fixed Deposit Interest Calculator?
A FD interest calculator is a tool that is specially designed to help investors get an estimate of the maturity amount that they should expect at the end of the preferred tenure of the specified deposit amount. The tool helps in calculating the details regarding how much interest one will earn from their deposits. An FD interest calculator uses the following information to provide you the estimate:
- Deposit amount
- Fixed deposit interest rate
- Tenure
The maturity amount you receive at the end consists of the principal amount and the accumulated interest earned on the deposits.
Working of Fixed Deposits Interest Calculators
In order to use an FD interest calculator, you need to follow the below-mentioned steps:
- Search for FD
- Select the customer type
- Select the fixed deposit type
- Enter the investment amount
- Enter the interest rate
- Select your fixed deposit tenure
After following these steps, you need to hit the “calculate” button. On doing this, the estimated maturity amount will be displayed on the screen.
How is the Fixed Deposit Interest Calculated?
Fixed deposit earns interest according to the interest rate. As a fixed deposit scheme is offered by numerous banks and NBFCs, the interest rate varies and is determined by the bank you are choosing.
To calculate the interest amount on fixed deposits having an investment tenure of six months or less, simple interest is used. Simple interest is defined as the interest earned on an investment over a predetermined time period at a predetermined rate of interest. It is computed by averaging the principal amount, the annual interest rate, and the number of years the tenure is valid.
For FDs with terms longer than six months, compound interest is calculated. Interest that is accrued on both principal and interest is known as compound interest. It is computed by dividing the principal sum by the interest rate multiplied by the number of compounding periods in years.
Banks mostly calculate interest on discounted rates when going for monthly interest payout.
Benefits of Using a Fixed Deposits Interest Calculator
Just like other investments, investing in fixed deposits involves analysing the budget and making it work with the financial goals of individuals. The fixed deposit calculator will help you compare the various types of FD schemes to find the one that offers best returns at the desired tenure. Keep scrolling through to know the benefits associated with using the FD interest calculators:
- Since the FD interest calculators are automatic, there are zero scopes for errors in the calculation.
- Zeroing in on cumbersome calculations and saving time and effort.
- The SIP calculator online is free of cost; thus, customers can use it multiple times to compare different options and make wise financial decisions.
Factors Affecting Fixed Deposits Interest Amount
Fixed deposit interest rates are determined by banks and NBFCs. Here are the factors that influence the interest amount:
Amount Deposited
The higher the amount you deposit, the higher will be the interest amount you will fetch at maturity.
Deposit Tenure
The tenure of deposits refers to the period of time for which the deposit amount stays invested in the fixed deposit. This period usually ranges from 7 days to 10 years. Different tenure fetches different maturity amount.
Applicant Age
Fixed deposits offer different interest rates depending upon the age of the applicant. For a senior citizen, the interest rate ranges anywhere from 0.25% to 0.75% over the regular interest rate.
Final Thought
Before selecting any investment option, make sure you have clarity about the returns offered by a particular option and the terms and conditions associated with it. You can use an FD interest calculator online to fetch the details.