How To Calculate FD Interest Rate In A Few Easy Steps
Made a fixed deposit (FD) but don’t know how to find the interest rate? Want to find the yearly, quarterly, or monthly interest using an FD interest rates calculator?
Well, this is the right place for you to get all your doubts cleared regarding FDs and how to calculate their interest rates. In this article, we will shed light on an FD calculator, how to use a fixed deposit interest calculator, and the FD formula to calculate the interest rate.
What is a fixed deposit and what are its different types?
A fixed deposit or FD, is a scheme provided by banks where you put money to get a reasonable rate of interest. Your money grows over time at a given interest rate. You get the total amount at the end of your maturity period.
It is a very safe option where interest rates are good with no market-related risks. The interest rate does not change by any clashes in the market, and you get your guaranteed returns at maturity.
There are four broad kinds of fixed deposits:
- Cumulative fixed deposit:
In this type of fixed deposit, when you invest your money, your interest gets compounded. You can use an FD interest rates calculator to calculate and analyse your maturity amount.
- Non-cumulative fixed deposit:
In this type of fixed deposit, when you invest your money, you get a fixed interest rate, and you can also withdraw that money on a monthly, quarterly, half-yearly or yearly basis. This can be called your monthly interest, quarterly interest, half-yearly interest, or yearly interest.
- Standard fixed deposit:
This is the basic form of FD, where you invest money for a period of 7 to 10 years at a fixed interest rate.
- Corporate fixed deposit:
The money you deposit in non-banking financial companies or NBFCs is called a corporate FD. You should check the company’s credit rating and seek expert advice to make sure your deposits are secure.
What are the benefits of investing your money in fixed deposits?
- You get assured returns even if there are market fluctuations or any crisis.
- You get reasonable interest rates, which is a significant advantage.
- You get additional tax benefits by investing in a fixed deposit.
- In terms of safety and security, you will be assured that your money is in a safe place.
- It acts as a security fund in most cases and is also useful if you ever want to go in for a loan.
What is an FD interest rates calculator?
An FD interest rates calculator is a handy, easy-to-use online tool that helps you calculate the maturity amount that you are going to receive if you invest your money at a given interest rate for a set period of time.
It also helps you in deciding which bank you should go in for, according to different interest rates, how much money you should invest in and the tenure.
What are the advantages of using an FD interest rates calculator?
Some of the exclusive advantages of using an FD interest calculator are:
- Accurate results:
An FD interest rates calculator is an AI-generated software, so the results it provides are accurate and specific.
- Error-free outcomes:
FD calculators, unlike manual calculations, have no chance of making any kind of mistake while calculating your figures.
- Saves a lot of time:
Since it is software, it does the calculations in less than a second, which saves a lot of your valuable time.
How to use an FD interest rates calculator?
Here is a step-by-step guide to let you know the correct way to use FD calculators. To calculate yearly, half-yearly, quarterly, or monthly interest rates, you have to:
- Select the amount you want to invest in the FD scheme.
- Select the tenure (monthly, quarterly, half-yearly, or yearly) according to your preference.
- Select the interest rate that you have decided on for your fixed deposit.
- Click on the ‘Calculate’ option and you will have your results in a second!
You can recalculate to make sure that everything is correct and that you haven’t mistakenly put incorrect values.
How is fixed deposit interest calculated?
To calculate fixed deposit interest, there are two methods that are widely used:
- Simple interest
This is an easy method to find your interest rate. The interest rate is always pre-fixed over a defined period of time.
The formula for simple Interest, SI, is:
SI = P×R×T/100
Where P is your principal amount, R is your rate of interest, and T is your time period.
For example, if you invest Rs 5000 rupees at an interest rate of 10 percent for a period of 5 years, then your interest is equal to Rs 2500 and the total amount is 7500 rupees.
This method is mostly not preferable as it does not give you any handsome returns.
- Compound interest
This is the most widely used method and, in fact, the formula used here is also considered the universal FD formula.
A = P (1+r/n) ^ (n * t)
Where A is the maturity amount, P is the principal amount, R is the rate of interest, n is the number of compounding frequencies, and t is the time period.
For example, if you invest Rs 5,000 at an interest rate of 10 percent for a period of 10 years, then your total interest would be Rs 7968.71 and your maturity amount would be Rs 12,968.71.
Conclusion
An FD interest rates calculator is a very useful tool to help you find the right amount of money to invest. Different banks and NBFCs provide variable interest rates. Make sure you talk to the bank officials, your advisors, and the people who have been investing in FD and then make an informed decision.
Piramal Finance has some highly engaging blogs and articles regarding fixed deposits. Make sure you visit their website to get some valuable content.