In-depth Comparison Between Fixed Deposit and Recurring Deposit

Featured Image Caption: FD vs RD

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A fixed deposit plan is a financial instrument that provides fixed returns on the lump sum amount that you invest whereas a recurring deposit helps you raise a corpus via monthly deposits. Both are entirely different instruments but fall in the same category of fixed income space. As a result, the interest rate and tenor remain fixed or constant in both RDs and FDs. To understand their potential benefits and drawbacks, let’s see the differences between the fixed deposit and recurring deposit:

Investment process

A fixed deposit allows you to invest your entire savings at once. Therefore, you will need a bulk amount while investing in an FD. The minimum deposit can range anywhere from Rs. 10,000 to Rs. 25,000 depending upon the financier.

As recurring deposits require that you make monthly deposits, the minimum amount is usually much less than the FD. You might need to deposit anywhere between Rs. 500 to Rs. 5000 depending upon your financial obligations and the financier you choose.

Calculation of interest

The invested amount will keep on gaining interest till maturity in the case of FDs. If you have invested in a cumulative FD then the returns will be much higher as the interest earned by your deposit in the first interest calculation cycle will be added to the principal during the next cycle. This will multiply your returns at a much higher pace and therefore FD returns are slightly above RD returns.

In the case of RDs, only the first deposit will attract interest for the entire period whereas the subsequent deposits will gather lower interest as they will be locked-in for a lesser period.

Investment tenor

An FD tenor usually varies from a few weeks or months up to 5 or 7 years whereas an RD tenor ranges from 6 months to 10 years. The reinvestment process is available for both recurring deposits and fixed deposits.

The RD interest and FD interest rates offered by banks were almost similar this year. If you want your investment to multiply quickly, you can plan to invest in a company FD like Bajaj Finance FD. The features of this FD scheme that can help you achieve your financial objectives are listed below:

– Flexible Tenor

A flexible tenor range that varies from 12 months to 60 months is provided by Bajaj Finance FD. This lets you invest your corpus according to your financial plans.

– The option of investing in several FDs

Bajaj Finance gives you the opportunity of investing in several FDs at once. This helps you to pick a different tenor and FD type for each of your deposits and thus provides much better liquidity and flexibility in terms of further investment plans.

By using this feature, you can line-up your deposits in such a way that some of your deposits will mature every year. You can use some of these returns for your immediate expenses and the remaining part can be reinvested or consolidated in an FD of longer tenor to multiply your savings without a break.

– Exceptional FD rates

Bajaj Finance FD offers you to lock-in your savings at exceptionally high FD rates of up to 7.25%. Therefore, your investments are bound to grow quickly and for FD rates comparison across different tenors and customer types, you can use the FD calculator provided on its portal.

By calculating the FD returns precisely, this online tool lets you find the actual worth of your investment. As a result, you can devise smarter strategies for your future investments. A 0.10% excess FD rate applies to investors if they use an online FD form and a 0.25% extra interest rate is offered to senior citizens.

– Systematic Deposit Plan

If you are impressed with the flexibility of RDs but want your corpus to provide substantial returns that are provided by the Bajaj Finance FD scheme then you can go for the SDP or Systematic Deposit Plan. In Systematic Deposit Plan, you can deposit an amount of Rs. 5000 or more every month and the number of deposits can vary from 6 to 48 months according to your financial obligations.

You can choose a tenor of up to 60 months for your deposit or all your deposits can mature on a single date according to your convenience. This deposit plan helps you to accelerate your savings at the FD rates of Bajaj Finance FD while providing you the flexibility of RDs.