Recurring Deposits (RD) serve as one of the best and simplest financial products to get guaranteed returns from the money market. It is a convenient form of savings that makes investment possible even for an individual whose monthly income is low. It is a term deposit where you invest a fixed amount of money by paying it in monthly installments. The features of recurring deposits make it a preferable and feasible investment option for salaried individuals as well as self-employed ones. An interested individual can use an RD calculator to calculate the amount he will receive on the date of maturity of his deposit.
A recurring deposit account can be opened with a minimum investment of as minimum as INR 1000 per month. Recurring deposits are not merely a risk-free investment option but there is much more to get from it. The returns are also good and these can be easily calculated through an RD calculator. It brings a host of benefits, which makes it convenient for the investors to save money and get fixed returns without any hassle.
5 most compelling reasons to invest in Recurring Deposit
1. Low-risk investment:
A lot of people wish to invest a part of their income to multiply their wealth. However, not all of them end up doing so because of the risks involved in it. Recurring deposit is a solution for them which provides an investment option that comes with almost no risks. A depositor can select the tenure of his investment as well as the amount he is willing to pay monthly. He can also calculate his returns using an RD calculator. If he completes the deposit cycle, he will definitely receive the estimated returns. It is more of a fixed deposit with fixed returns for which you pay on a monthly basis. This assurance of returns makes recurring deposits a very fruitful investment option.
2. Fixed & Good Returns:
Although the interest rates offered on recurring deposits vary from bank to bank, the returns are fixed and guaranteed. The interest rates usually range between 5% and 8%. One can visit a preferred bank to get the details of the interest rate offered, and then calculate the returns he will receive at the maturity of the deposit tenure by using an RD calculator. The tenure of a recurring deposit starts from as low as 1 year and can be up to 10 years. A person is free to choose the amount of his deposit as well as the time period for which he wishes to invest. The interest rates on a recurring deposit are close to that of a fixed deposit but the former option is much more flexible. Check out this RD calculator to get an estimation of total returns on your savings.
3. The flexibility of withdrawal: A
Recurring deposits can be easily withdrawn prematurely in case of any emergency. The bank usually charges a penalty of 1-2% on the deposited amount in case of any premature withdrawal. The interest is calculated till the time of withdrawal and the amount is sanctioned to the depositor after deducting the penalty. No interest is paid in case of a withdrawal that is made before a certain time which is predefined by the bank. Although a bank does not allow any partial withdrawal, the option of a premature withdrawal definitely makes recurring deposits a flexible form of investment. You can refer to an RD calculator to get an estimation of the maturity value of your deposits.
4. Source of Loan:
A recurring deposit account can serve as a source of loan to the depositor. In case of an emergency, if a person does not wish to close his RD account, he can apply for a personal loan. The bank considers the balance of the RD account as collateral and may provide a loan to the depositor if the need be. About 80-90% of the recurring deposit value of the customer is granted as a loan by the bank. However, certain terms and conditions may apply which one must discuss with the bank before applying for a loan.
5. Feasibility of Payment:
This is also an unbeaten advantage of recurring deposits that it gives a person the flexibility of payment. One can pay the total amount he wishes to invest for a fixed period of time by paying the amount in easy monthly installments. Also, most of the banks do not charge any penalty in case of a missed payment. Since the RD account is usually linked with the savings account of a depositor, the missed payment is automatically deducted in the next month from the individual’s account.
Recurring deposits allow a person to reap the benefits of fixed deposits without making a lumpsum payment. One can pay a fixed amount of money every month and earn an annual interest on the investment which is much higher than the interest rates of a general savings account. The returns can be easily calculated with an RD calculator. Investing monthly savings is a good habit to get into and recurring deposits provide a flexible and stable platform for doing so.