How Much Monthly Interest Will You Earn For a ₹1 Lakh Fixed Deposit across Different Tenors?

As you consider investing ₹1 Lakh in a Fixed Deposit (FD), it’s essential to understand how they work. FDs are a secure and reliable way to grow your money. By investing a lump sum for a predetermined period, typically ranging from 7 days to 10 years, you earn a fixed interest rate.

This predictable return makes FDs attractive for risk-averse investors seeking stability and guaranteed returns. When browsing the FD interest rates offered by banks and NBFCs, you must compare the monthly interest payout provided by them.

Comparing Monthly FD Interest Payout  

The monthly interest payout you receive depends on the interest rate offered by the issuer. Here’s an overview of the estimated monthly interest for a ₹1 Lakh fixed deposit across different interest rates at an assumed tenor of 5 years: 

Disclaimer: The above-mentioned interest rates are only indicative. 

 Understanding Bank FDs

Bank issued fixed deposits are secure investment options where individuals deposit a lump sum for a predetermined period, earning fixed interest rates. For someone looking to invest 5 lakhs in an FD with monthly interest payout, a bank FD offers stability, assured returns, and the convenience of regular income.

Benefits

• Security and Reliability: FDs issued by banks are insured for up to ₹5 Lakhs by the Deposit Insurance and Credit Guarantee Corporation (DICGC)
• Wide Range of Options: Choose from a wide range of tenors, starting from 7 days up to 10 years
• Convenience: Most banks have a wide network of branches and offer online account management options, making it convenient to invest and manage your FDs

Drawbacks

• Interest Rate Fluctuations: FD interest rates fluctuate with market conditions, affecting potential returns
• Limited Flexibility: Early withdrawals from FDs could come with penalties. This could limit your access to funds before maturity

Understanding NBFC FDs

NBFC fixed deposits are deposits offered by Non-banking financial companies (NBFCs), providing an alternative to bank issued FDs. They offer competitive interest rates and flexible terms. For individuals seeking monthly interest payouts, an NBFC FD could be beneficial, especially when investing ₹5 Lakhs, providing regular income while preserving capital.

Benefits

• Potentially Higher Interest Rates: NBFCs may offer slightly higher interest rates than banks to attract investors
• Flexible Options: Some NBFCs might offer flexible FD schemes with features like premature withdrawal options with lower penalties

Drawbacks

• Lower Security: NBFCs are not insured by DICGC in case of company failure, posing a higher risk compared to banks
• Limited Reputation: Not all NBFCs have the same reputation or financial stability as established banks

 Factors to Consider When Choosing an FD

Before selecting an FD scheme, consider the following factors to align your investment with your financial goals:

• Investment Tenor Decide on the duration you can commit your funds, aligning with your investment horizon.
• Interest Rates Compare interest rates offered by different banks and NBFCs for your desired tenor.
• Security Consider the security of your investment. Banks offer a high degree of security due to deposit insurance. Meanwhile, NBFC issued FDs are rated by agencies like CRISIL and ICRA for their credibility.
• Flexibility Choose an FD scheme that aligns with your liquidity needs. Some FDs offer premature withdrawal options, but these typically come with penalties.
• Additional Features Some FDs offer additional features like auto-renewal or loan against fixed deposit. Consider these benefits based on your requirements.

Fixed Deposits provide a reliable and secure way to grow your money. By understanding the potential monthly interest, you can make an informed decision. Remember to consider factors like investment tenor, security needs, and flexibility when choosing the ideal FD scheme for your financial goals.

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