Understanding the impact of changing interest rates on fixed deposit returns

In order to build wealth in the long run, investing at an early age in life is very important. In India, a fixed deposit is considered one of the most safest investments as it offers assured returns, no matter what.

Moreover, specific tools help calculate FD interest rates before investing, making it easy for potential investors before investing their hard-earned money.

What is a fixed deposit?

Also known as a term deposit, it is a type of investment instrument financial institutions offer. In this scheme, you can easily deposit a certain amount of money for a fixed time period, ranging from a few months to several years, at a predetermined rate of interest.

During the investment tenure, the rate of interest remains the same throughout, and you earn an assured return on your total investment. Once the FD matures, you can easily withdraw your initial investment along with the interest amount. Typically, it is important to keep in mind that the longer the duration of the investment, the higher the interest offered.

What is the impact of changing interest rates on fixed deposit returns?

The FD interest rate plays a significant role in determining the returns on FDs. The higher the rate, the higher the returns, and vice versa. Fixed deposits are considered to be low-risk investments, as they offer a fixed rate of return and are not subject to what happens in the market.

●    Increase in Interest Rates

When the rate of interest increases, the returns on this investment also increase. This basically means that if you have invested in an fd with a lower rate of interest, you’ll miss out on higher returns that you could have easily earned if you had invested when the interest rates were higher.

●    Decrease in Interest Rates

When the interest decreases, the returns also automatically decrease. This means that if you have invested in this scheme at a lower rate of interest, you may earn lower returns as compared to a higher interest rate.

●    Fixed Interest Rates

If you have invested in a fixed deposit with a fixed interest rate. Then the returns will remain constant throughout the investment tenure. Keep in mind that it will remain constant regardless of the changes in the interest rates.

How to invest in an FD?

Before investing in an FD, ensure that you use an fd interest rates calculator. This’ll help you plan your budget and manage finances accordingly. However, around three months ago, when I was planning to invest in the same, one of my friends told me about the Bajaj Finserv application.

Trust me, this application offers a smooth and seamless experience. Moreover, it also has a fixed deposit interest rates calculator.

  1. Download the Bajaj Finserv application.
  2. Sign up by entering your mobile number.
  3. Go to the Fixed Deposit option under the Insurance Bazaar on the home page
  4. Choose accordingly, and you are good to go.