India , 15th July 2019 –
When you invest in a FD, you earn returns at a fixed interest rate through the tenor. Usually, fixed deposit rates on company deposits are higher than those you can obtain at a bank. For example, you can earn interest at a rate as high as 8.95% when you invest in a Bajaj Finance Fixed Deposit. Even after the recent repo rate cuts, this FD is offering one of the highest interest rates.
While you may think that marginal differences in FD rates do not amount to much, results obtained through an FD calculator indicate otherwise. To help you make a smart FD investment, here are 7 things to know about high FD interest rates.
Company FDs normally offer you better rates than bank FDs
You can open an FD with a bank or a non-banking financial institution. While bank fixed deposit schemes may be the more familiar option, they aren’t the best when it comes to getting high interest rates. Company fixed deposit schemes can outmatch bank FDs in this regard.
To illustrate, consider that FD interest rates at banks run up to around 6.5 to 7%. At most, you may get a rate of 8 to 8.25% on a bank FD. However, rates on a Bajaj Finance FD, a company deposit, start at 8% and run up to 8.95%.
Even a 0.5% rate difference can impact your returns greatly
At first, you may not make much of the marginal differences in FD interest rates. For example, you may obtain a rate of 8.10% on a certain FD and an interest rate of 8.60% on Bajaj Finance FD taken for 3 years with interest payouts at maturity. The 0.5% rate difference impacts your returns substantially, especially in the long run.
Consider that you start with a principal of Rs. 5 lakh and opt for a tenor of 5 years. An FD that offers a rate of 8.10% transforms your principal into Rs. 7,38,071. However, the FD that yields interest at an 8.60% rate gives comparatively better returns. Here, you get Rs.7,55,299 at maturity.