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When should I get a floating rate fixed deposit?

By Finserv MARKETS - Oct 15,2019
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When should I get a floating rate fixed deposit

Among the different types of investment available to people, fixed deposits have long been considered as the best investment plan for investors looking to secure their funds and earn guaranteed returns on investments. Since the government takes guarantee for fixed deposit accounts, an investor will receive their funds back regardless of the functioning of the bank or financial institution in which their fixed deposit account was started.

Fixed deposits are offered by nearly every bank and financial institution, owing to the enormous popularity they enjoy among all types of investment. They ensure savings by investors since the deposit involves a sum of money being locked away for a certain period of time. This tenure could be flexible, especially if you open a Fixed Deposit on Finserv MARKETS where you can choose a tenure ranging from 12 months to 5 years. The major factor driving fixed deposits as the best investment plan are the interest rates offered on the deposit, which are higher than the interest rates offered on other instruments such as savings accounts.

On Finserv MARKETS, investors can accrue return on investment at rates of interest starting from 8% and even going up to 8.7%. If you are a senior citizen, you can earn from interest rates which are over and above the market rates by 0.35%.

Fixed deposits usually provide returns on investment at the rate of interest decided at the time of making the investment. However, in recent times, floating interest rates have become available for those holding deposits for longer time periods. Floating interest rates are variable as they can change over the course of the tenure the deposit has been made for. If investors choose to opt for a floating interest rate, they are informed of the base rate at the time of making the deposit and then the actual rates fluctuate around this fixed rate as per floating components.

Since the tenure of fixed deposits can vary depending on the investors’ requirement of funds for meeting long or short-term goals, a lot of options are now available to investors to make the entire process more convenient and hassle-free. Among fixed deposits too, investors can choose whether they wish to opt for a cumulative or non-cumulative deposit.

While the non-cumulative fixed deposit provides investors with return on investment at predetermined frequencies, including monthly, quarterly, half-yearly or annually; cumulative deposits enable these returns to be reinvested along with the principal amount; thereby allowing for a larger corpus at the time of the maturity of the fund.

Several factors differentiate floating interest rates from fixed ones. It is essential to keep in mind that floating interest rates are hugely dependent on market conditions, which means that it is important to analyse market trends before you take a call on whether you want to opt for a floating rate of interest or a fixed one. However, since floating interest rates are usually available for long-term deposits, it is likely that the market will stabilize over the period of your deposit. Read on to learn about why floating-rate fixed deposits could be more advantageous for investors.

  • Higher Returns on Interest:

When you opt for a fixed rate of interest for your fixed deposit, you end up earning returns on investment at the same rate of interest as was fixed at the time of making the deposit. In India, generally, floating rates of interest tend to be higher than those available with fixed interest rates. As a result, it might be possible for you to earn higher returns by opting for a floating rate of interest.

  • Unexpected Gains Could Occur:

When you opt for a fixed rate of interest, you are opting to let prevailing market conditions decide the returns you generate. Since these are available for long-term deposits, there is the possibility of investors benefiting from favourable market conditions where interest rates are higher.

  • Higher Earnings:

In case of favourable market conditions, the floating rate of interest would be higher than the base interest rate intimated to you at the time of making the investment. If the market takes a positive turn during the course of your deposit, you can earn more on the same investment than you did even a while back. If you have opted for a cumulative fixed deposit, your corpus at the end of the tenure would be significantly larger if you opt for a floating rate fixed deposit. If you invest in Fixed Deposits on Finserv MARKETS, you can track your returns through an online Customer Portal at any time, from anywhere at all.

Fixed deposits are widely acknowledged to be the best investment plans owing to the safety and security they offer to investors for their funds. Differing from other types of investment instruments, fixed deposits are guaranteed by the government which adds an additional level of security to investors. When you invest in fixed deposits on Finserv MARKETS, you can rest assured that your funds are safe since these fixed deposits have received ICRA MAAA and CRISIL FAAA rating; which marks them as more stable than other types of investment.

Finserv MARKETS, from the house of Bajaj Finserv, is an exclusive online supermarket for all your personal and financial needs. We understand that every individual is different and thus when you plan to achieve your life goals or shop for the gadget of your dreams, we believe in helping you Make it Happen in a few simple clicks. Simple and fast loan application processes, seamless, hassle-free claim-settlements, no cost EMIs, 4 hours product delivery and numerous other benefits. Loans, Insurance, Investment and an exclusive EMI store, all under one roof – anytime, anywhere!

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Bajaj Finserv Direct Limited ("BFDL"), erstwhile Bajaj Financial Holdings Limited is a registered corporate agent of Bajaj Allianz Life Insurance Company Limited and Bajaj Allianz General Insurance Company Limited under the IRDAI composite registration number CA0551 valid till 10-Apr-2021. BFDL also renders services to Bajaj Finance Limited (‘BFL’) and Bajaj Housing Finance Limited (‘BHFL’) (referred hereinafter as ‘Lending Partner’) in sourcing of customers, providing preliminary credit support activities, fulfilment services and post-acquisition customer services related to lending business. Registered Office: Bajaj Auto Limited Complex, Mumbai – Pune Road, Akurdi, Pune – 411 035 CIN: U65923PN2014PLC150522