Fixed deposit accounts are popular investment measures where you can invest money for a fixed period and accumulate interest on it. Even though the interest rates may fluctuate during the investment period, your deposit will remain locked at the same standard of interest — at the one you invested in.
For all the benefits that fixed deposits offer, you might not want to break an active FD account. One reason for this is that the gains are constant and not affected by market fluctuations; another reason is that breaking an FD prematurely can attract a deduction fee.
Impacts of premature withdrawal
Banks strongly discourage FD account holders from closing their accounts before they attain their maturity. In the event that the account holder decides to close their account before it matures, the banks are allowed to penalize the investor by attracting 0-1 percent fee on their rate of interest according to the guidelines laid out by the Reserve Bank of India.
In times of financial distress, breaking an FD might be an option that you cannot help, but look at. However, what’s the point of breaking a well-established FD account?
Here, we will look at three alternatives to breaking a fixed deposit account that you can look at in times of need.
1. Taking a loan against your FD
One of the most popular alternatives to breaking FDs is taking a loan against them. While on loan, your fixed deposit will continue to earn interest. The effective rate of interest will be 1-2 percent on loan, and it will be cheaper than a credit card or personal loan.
Most banks give you the facility to avail 70-90 percent of the deposit as loan or overdraft. The amount of credit you can raise on your fixed deposit varies from bank to bank.
However, it must be noted that a loan tenor cannot exceed the term of your deposit, as most banks will not allow you to close your fixed deposit while the loan is still active.
2. Breaking your money into different parts
Instead of breaking an FD prematurely, another option that you could look forward at is breaking down the money into different parts so that you can make separate fixed deposit accounts from it. Doing this will make sure that you no longer have to rely on just one deposit. If you need to access smaller amounts, you can do so by breaking one of the several FDs. This way, you will also be able to protect a significant chunk of savings and keep on attracting interest on it through different fixed deposit accounts.
3. Take a personal loan
If you do not want to take a loan on your fixed deposit account and want it to generate interest as usual, the option that you have is taking a personal loan. You can take a personal loan based on your bank records and assets and be assured that your fixed deposit is not broken.
You can use the personal loan to sail out of the financial distress, and then maybe repay it once things are better. You can also schedule your personal loan in a way that it falls around the time of maturity so that you can pay back your personal loan with the money you get from your fixed deposit account at the time of its maturity. There are also travel loans, loan against property, and home loans available.
Fixed deposits on Finserv MARKETS have turned out to be a popular option among several investors as they offer a high-interest rate of up to 8.95 percent. For senior citizens, the choice is even more lucrative as the interest is calculated at an even higher rate.
FDs can be a perfect choice to store emergency cash as they have a flexible savings tenure — between 12 months to five years. Besides, the fact that your savings are not affected by market fluctuations only makes investing on Finserv MARKETS a more attractive choice than ever. Here, your fixed deposit accounts come with a stable ICRA MAAA and CRISIL FAAA rating, which means that your investment is in safe hands. With no hidden rates, the entire process of opening a fixed deposit on Finserv MARKETS is hassle-free.
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