There are several reasons why an investor looks forward to parking his surplus funds in fixed deposit. There isn’t any doubt regarding the safety of the FD scheme. It is one of the safest investment avenues. A risk-free investment helps the investors to grow their savings and earn a substantial profit at the end of the tenor. Sustainability is what most investors are inclined towards when it comes to investing in a fixed deposit. Fixed Deposit offered by Non-Banking Financial Companies (NBFCs) are more beneficial as compared to banks and other lenders. They offer a considerably higher interest rate as compared to other financial institutions. Many people doubt the stability of the deposits provided by these financial companies. They are right in their place, but there are various NBFCs which are highly accredited and offer services which are better than the banks.
Talking about the interest rate, it is one of the most important instrument when it comes to fixed deposit investment. Three things have to be considered the most when you invest in fixed deposits. The amount that you invest, the rate of interest that your amount is accruing and the tenor for which you are investing. Among these three variables, the rate of interest is the most important one as it decides the amount of profit you are going to make on your investment. The most considerable factor when investing in a fixed deposit is that the interest rates are not linked to the market.
How can you Avail Monthly Interest Pay-out?
There are a limited number of financial institutions which offer this service, the major one being an NBFC, Bajaj Finserv. They offer two types of fixed deposit – Cumulative and Non-Cumulative fixed deposit. If you opt for Non-Cumulative one, the amount invested will accrue interest throughout the tenor. The rate of interest can be received monthly, quarterly, half yearly and annually. A non-cumulative fixed deposit is often opted for when investors want to use the interest earnings to pay for general expenses. Most of the time the interest earned is spent to pay EMIs. Paying for existing loans and other expenses are few of the reasons why investors seek monthly interest pay-out. Thus, you should approach an NBFC if you are looking to avail monthly interest payout.
However, before you approach any NBFC, it is essential that you take their stability rating into consideration. It is important that you pick an NBFC which is highly reputed with regards to safety. Apart from the NBFCs, there are banks which offer monthly pay-out. However, if you opt for the monthly payout option, then you will be provided with the rate of interest at a discounted rate. For instance, if a financial institution is offering you 8% per year payout and on the other hand, if you opt for monthly interest payout, then you will receive an interest rate of 7.25%.
As mentioned above, the rate of interest offered by the fixed deposits is related to the tenor. Longer the tenor, higher will be the rate of interest and vice-versa. If an individual opts for a cumulative rate of interest, he/she will have a lock-in period. Thus, it is essential that you select the Non-Cumulative rate of interest.
Monthly payout options are advisable if you need additional income on a monthly basis. Before you opt for a fixed deposit investment, it is essential that you check whether the financial institution is offering you monthly payout option or not.