Why Should You Rely On FDs While Saving For Down Payment?
People who want to avert the risk factors involved in equity and mutual funds find fixed deposits or FDs to be one of the safest and most preferred investment options. No matter what the reason is for saving up money such as buying flats near Perumbakkam or looking for new flats in OMR, FDs allow investors to manage their financial risks and help people to fulfil their financial goals at different stages in life. There could be many financial obligations such as securing the future of children, one’s education, marriage, buying an apartment for sale in Sholinganallur, and building a hedge for unexpected expenses. With the help of fixed deposits, one can build savings smartly over a certain period.
But before investing in an FD and fulfilling your dream of buying a flat near Perumbakkam, there are some important points that you must consider:
Safety and security:
Fixed deposits are investments that are secure and produce assured returns. They are offered by various corporates and HFCs which are again rated by different credit rating agencies. This helps investors in making a wise choice. Given you are planning on investing in a corporate FD, always choose those corporates who enjoy high ratings like ‘AAA’ or something similar.
When it comes to fixed deposits, there are many companies which have different minimum and maximum deposit amounts that one has to abide by. So it is always advisable to check these amounts with the companies before investing. For example, say you want to buy a flat near Perumbakkam. At PNB Housing, the minimum amount you can invest as a fixed deposit is INR 10,000. This amount differs from one bank to another and investors should always check it before investing.
How long do you want to lock in your money in the form of a fixed deposit? The question of tenure is important when investing in FDs. Almost all corporates offer a deposit period between a year and 10 years. It is crucial to choose your tenure correctly and carefully as premature closure of a fixed deposit may attract penalties which will ultimately reduce the total amount of interest you earned from the deposited money. It is easier to understand with an example: say you need a certain amount of money after two years. So choose the period of investment as two years or lesser.
Rate of interest:
On the grounds of the choice made by the applicant, corporates offer fixed deposit schemes which pay interest on a cumulative and non-cumulative basis. Investors who want to earn a regular income on a monthly, quarterly or annual basis can choose from the non-cumulative schemes. On the other hand, investors who are aiming for savings and returns to be earned over a long time can choose cumulative schemes where the principal and accumulated amount are paid to the customer when the fixed deposit reaches its maturity. However, the rate of interest at which these fixed deposits are functional is subject to change and is at the sole discretion of the company. Always remember that the rate of interest offered by corporates and HFCs is higher than the rate of interest on fixed deposits offered by banks.
When it comes to FDs, a nomination is extremely important. More so if one is the sole depositor. In case of the death of the depositor, the nominee will be able to claim the money along with the interest.
Tax Deductions at source or TDS:
The interest and income earned from any particular corporate fixed deposit that exceeds the amount of INR 5000, is liable to be levied a tax deduction at the source. Hence, the limit of TDS for an HFC is INR 5000.
Advantages for senior citizens:
Fixed deposits are more beneficial when it comes to senior citizens as depositors. Corporate fixed deposits are a great investment option for senior citizens as they provide them with safe returns as an alternative income during their period of retirement. The rate of interest offered to senior citizens is mostly 0.25% higher than the standard rate of interest. Hence, fixed deposits turn out to be a good investment option if you have retired family members to look after.
Investors and customers have preferred fixed deposits for a long time given its reputation of being one of the safest and most secure investment avenues. With the above-stated reasons we hope you will be able to understand why FDs are the safest when saving for a downpayment.