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.
Higher rates let you meet your financial goals like a retirement fund more effectively
Whether you need to finance your child’s overseas education or build a large retirement corpus, high interest rates help you tackle your financial goals more easily. When you invest in FDs for longer timeframes, say 20 years, higher FD interest rates provide you with additional finances and help you cater to urgent and unforeseen needs as well.
FD interest rates depend on tenor and payout frequency
To fetch the highest fixed deposit rates your issuer has on offer, choose your FD parameters wisely. Generally, FD interest rates peak when the tenor reaches 3 years. For example, as a new customer, interest rates on a Bajaj Finance FD start at 8%.
However, this rate rises to 8.60% when you invest for a tenor of at least 3 years and take back your proceeds at maturity. While you have the option to earn frequently through regular interest payouts, this comes at a cost. The interest rate drops as your payout frequency increases.
Higher FD interest rates for senior citizens and existing customers
By investing in a Bajaj Finance Fixed Deposit, existing customers and senior citizens benefit from higher FD interest rates. The interest rate hikes are 0.25% and 0.35% for both customer profiles, respectively. By accounting for this hike, the FD interest rates for senior citizens goes up to 8.95%, which is one of the highest interest rates in the country.
0.10% more interest on renewing FD
Investing with a Bajaj Finance FD also helps you develop good investment habits with greater financial discipline. Here, you get a 0.10% interest rate boost when you renew your FD. In the long run, this incremental rate increase can provide you with a higher payout that you may consider a surplus. Use it to add a bit of luxury to your lifestyle or to cater to short-term financial setbacks.
High interest rates are more valuable when coupled with low risk
Lucrative interest rates are dependable only when the FD that offers them has good credit ratings. Otherwise, you may not get timely payouts and at worst, your principal may not be returned. Bajaj Finance’s FD has been rated with an MAAA rating by ICRA and a FAAA rating by CRISIL. These being the highest in their respective categories, assure guaranteed returns.