Reasons Why People Prefer Investing in Fixed Deposits?

Since many generations, saving our money in the form of FD or fixed deposits has been a tradition. Even today, people prefer investing in fixed deposits, Not just in India in other countries too. Today even after having Diverse Investment options People in India Invest in Fixed deposits and even the NRI's Still Prefer NRI Fixed Deposit services. As Fixed deposit Investment provide fixed and stable interest rates which don’t fluctuate.

So what is the reason; why people still prefer Fixed deposits? 

Fixed Deposits are term deposits where you put in a certain amount and earn fixed interests after a fixed time. When these deposits get matured, you can either withdraw or reinvest. Let’s see what other benefits FDs have that people continue to invest in them.

 

Secured returns

Firstly, a bank FD offers fixed and secured interest which is higher than that of a savings bank account. These returns are, in turn, beneficial to counter inflation when compounded in the long run. However, keep in mind that very high rates of interest are sometimes fishy and might risk your capital.

 

FDs help in your liquidity needs

FDs are also flexible in their tenures like you get options for quarterly compounding and quarterly and monthly pay-outs of interest if you want to draw interests at regular intervals. Otherwise, you can also choose the cumulative method where you reinvest the interest.

Flexi fixed deposits are the ones in which automatic transfers from your account to the FD occur when your balance crosses a certain threshold. Here, money can be easily accessed from your savings account via cheques or ATMs, thus, taking care of your liquidity needs.

You can always withdraw your money prematurely in emergencies by paying a minimal penalty. 

 

Helps in your short-term goals

If you want to save your money for some goals which are a couple of months or years away, fixed deposits are the best investment option. They come handy when you need them and hence, are also called contingency funds.

 

Avail loans against your bank FD

Another wonderful benefit of investing in a fixed deposit is that you can avail loans against your FDs when you don’t wish to liquidate them during urgent monetary needs.

Moreover, the interest rate on such loans is comparatively lower than those for personal loans. And the rate of interest is charged on the amount you have utilized and for the tenure, you have utilized.

You have the flexibility to repay your loans till the bank FD is in force, and, there are no prepayment charges on early closure.

 

Save your taxes with FDs 

A Tax Saver bank FD helps you in saving your taxes as these fixed deposits are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. You can invest in Tax Saver FD only if you’re a resident of India or belong to a Hindu Undivided Family (HUF).

This FD can be held in single or in joint ownership; however, deduction of taxes can only be available to the one who has a valid PAN (Permanent Account Number).

 

Concluding, a fixed deposit is not just to park your money, it helps you strengthen your portfolio. When you deposit your funds with SBM Bank, you get secured returns at attractive rates with hassle-free reinvestment options. You can also open your FD online without visiting the SBM Bank branch.