Fixed deposits have become a popular investment instrument among Indians because they guarantee high returns with minimum risks. The interest rates that apply to FDs remain consistent and this makes it easy for the investor to predict the returns after they deposit a certain amount of money for a fixed period.
How to calculate the returns?
The returns and interest generated by an FD can be calculated with this formula:
A = P x (1 + r/n) nt
A = Maturity amount
P = Principal
r = Interest rate
t = tenor
n = frequency of compounded interest
I = Interest earnings
For example, if a person deposits Rs. 30,000 for a period of 5 years at 7% interest that is compounded at a quarterly basis then the Maturity amount will be as follows:
A = 30000 x (1+ 0.07/4) ^ (4 x 5) = 30000 x 1.415 = 42,450
Now, I = A – P = 42,450 – 30000 = 12,450
Therefore, interest earned will be 12,450.
Now, if you are finding this manual calculation hard, you can always go for the online calculation of fixed deposit interest. Many banks and non-banking firms have integrated an FD interest calculator on their website which allows us to calculate the final maturity amounts and interest earnings in seconds.
How to calculate FD interest using online calculators?
Online FD calculators provide accurate results and do not require any complex calculation method. You simply have to enter these values in an FD calculator:
Deposit amount, tenor, interest rate, FD type.
Once you enter these details, the online calculator will automatically calculate the maturity amount and interest.
Benefits of using an online FD calculator
The manual formula increases the risk of errors. However, in online calculators, you only have to ensure that you enter the correct values . Therefore, these calculators tend to generate more accurate results each time.
It is convenient to use an FD calculator because you do not require any additional tools to calculate the interest and maturity amount.
Aids in investment planning
An online FD calculator generates results quickly. This helps you to calculate the interest and maturity value for different tenors and principal amounts easily. As a result, you can also compare different types of FDs and their returns efficiently by using an FD calculator.
Non-banking finance companies like Bajaj Finance provide high-interest rates of up to 8.05%. Also, these deposits are rated highly for their stability and safety by credit rating organizations like ICRA and CRISIL.
If you do not want to wait until you accumulate a sufficient corpus to invest in FD, you can also invest in the SDP i.e. Systematic Deposit Plan. SDP is a monthly investment plan offered by Bajaj Finance in which a person can start depositing Rs. 5000 each month and reap all the benefits of a fixed deposit investment.
The number of deposits in SDP can range from 6 to 48 and the tenor can be chosen from 12 to 60 months for each of the deposited amounts. The interest rate for each of these deposits will be the one prevailing on the date of deposit. As a result, investors can benefit from the prevailing interest rates and start growing their savings from an early stage of their career.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at HighlightStory.