You must invest in an instrument that provides a steady income source at every stage of your life. A fixed deposit is one investment option that provides high returns along with the safety of the invested amount.
Though the security of invested capital is ensured by the fixed deposits, the FD rates have seen a downward trend this year especially after repo rate cuts and some other measures taken by RBI to encourage borrowers and infuse liquidity in the market.
Therefore, the fixed deposit interest rates that were well over 8% last year have come below 6% and some banks are offering even lower interest rates. Therefore, it is obvious for you to think of some methods through which you can still ensure high earnings through FDs. Here are some ways to earn high interest earnings from FDs even amidst falling FD rates:
Don’t avail periodic interest payouts
Interest on FDs are either compounded quarterly or paid quarterly (or monthly) as per the type of fixed deposit you choose.
If you opt for periodic interest payouts by investing in a non-cumulative FD then you lose some interest that you can gain from compounding i.e. reinvestment of interest along with principal during interest calculation that is offered by cumulative FDs.
To earn substantially from FDs, you can invest in cumulative FDs of longer tenor and then reinvest the earnings in another cumulative fixed deposit.
Invest in corporate FDs
Not everyone can let go of the interest payouts as they require some funds to meet their regular expenses. Such people can go for the corporate FDs that still offer higher interest rates than bank FD rates.
Let’s say you have accumulated a corpus of Rs. 10,00,000 and want to invest it in bank FD for 5 years then at the most you will get an interest rate of 5.5%. However, if you invest the same corpus in a Bajaj Finance FD for 5 years your deposits can grow at the rate of 7.35%.
See how this can affect your earnings from the below table:
|Fixed deposit||Principal||Tenor||Interest rate||Interest earnings|
|Bank FD||Rs. 10,00,000||5 years||5.5%||Rs. 3,50,452|
|Bajaj Finance FD||Rs. 10,00,000||5 years||7.35%||Rs. 4,25,651|
You can see the difference in earnings between these two FDs. Moreover, with Bajaj Finance fixed deposits, you also get the option of investing in either cumulative or non-cumulative FD as per your requirements. Also, a 0.10% additional FD rate is provided on opening a fixed deposit account by submitting an online FD form and an additional 0.10% rate is applicable if you go for an auto-renewal of your FD.
Ladder your FDs
By laddering FDs, your deposits can earn at varying interest rates as you split your corpus and invest in multiple FDs of different types and tenors. This flattens out the curve of interest rate fluctuation and also presents you an opportunity to earn more by investing returns of multiple FDs in a high paying FD.
Bajaj Finance gives you the option of investing in multiple FDs with a single cheque via the multi-deposit facility. You can use this to ladder your FDs conveniently and you also get the option of choosing a flexible tenor from 12 to 60 months as per your requirement.
These FDs are also safe as they have received high ratings for safety and stability by credit rating organizations such as ICRA and CRISIL. Also, you can predict your returns in advance by using an FD calculator monthly interest tool available on their website.
FD interest rates have gone down this year owing to the repo rate cuts and other measures taken by RBI to encourage the borrowers. This has raised a dilemma among investors who are looking to invest in a high paying FD. However, there is no need for worrying as Bajaj Finance FD rates in 2020 are as high as 7.35%. This ensures that your deposits earn at a higher FD rate and you also get the option of investing in multiple FDs of different types and tenors with a single cheque. Moreover, these FDs are safe as they are rated highly by credit rating organizations like ICRA and CRISIL.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at HighlightStory.