The fixed deposit also known as a term investment is a deposit instrument available at the bank, as well as NBFC. These investments offer you a constant rate of interest throughout the tenure. Plus, these deposits provide you with higher interest rates, depending on terms and conditions. Most banks charge for premature withdrawal of fixed deposits. So, the penalties, interest and maturity value can be determined by the fixed deposit calculator via online means.
Fixed deposits are profitable for long-term investors as they assist in earning wealth. One can invest in a fixed deposit with a flexible tenure ranging from 7 days to 10 years. There are two fixed deposit types:
- Cumulative
If we invest in a cumulative fixed deposit, the interest undergoes annual calculation, but it is paid at maturity. One can compute their monthly interest by FD calculator.
- Non-Cumulative
In this type of fixed deposit, one can avail of their interest payouts periodically. The payouts can be chosen on a quarterly, monthly, half-yearly, or annually basis by an investor.
Also, maintaining a financial portfolio can be very unsettling sometimes. Therefore an FD calculator is the right way to strike a balance in between. Let’s get into further details to gain the adequate knowledge required.
What is an FD calculator?
A fixed deposit calculator is a tool that is designed to obtain an approximation of maturity value. This value is expected by an investor at the end of tenure for a particular deposit with a fixed rate of interest. Moreover, it also helps in calculating the interest an investor would earn on a fixed deposit. In general, the FD calculator takes the existing interest rate, investment amount and tenure as input. It provides the wealth gain and maturity amount as an output.
Benefits of FD calculator
An investor needs to know about their FD maturity because it directly impacts one’s financial portfolio. Therefore, one can easily determine their maturity amount by FD calculator, saving time and effort.
There are several other benefits of the fixed deposit interest calculator, to proceed with:
- The tool is free for use. So anyone can use it several times and compare the final amount, combining FD rates, terms and amounts.
- Overall, one can plan the future accordingly after knowing the exact maturity value. As it is an automatic calculator, with no scope for errors.
- The investor can adjust the calculator to know which FD period provides them with their desired goal.
Fixed Deposit Calculator Uses
With the use of the FD calculator, you can estimate the interest income before investing. The FD calculator plays a great role in determining the maturity value with ease. Fixed Deposit is all about minimizing risks and guaranteed interest. There remains a considerable risk if you invest in a market (like equity mutual funds).
- Fixed deposits can be very useful in absorbing the losses, if any, to a certain limit. An investor should know how much to invest concerning their budget.
- It also helps in comparing various FD schemes by banks and other financial organizations. One can easily comprehend which scheme provides the best return at the desired tenure.
How to Calculate Fixed Deposit Interest Rates?
A Fixed Deposit interest calculation has two parts – Simple interest Fixed Deposit and Compound Interest Fixed Deposit. The calculators available online work both ways.
What is simple interest FD?
You can calculate the interest by multiplying the rate of interest, scheduled period and exact amount with each other. Also, it is very simple and hassle-free to use, providing adequate outcomes.
SI = P x R x T/ 100
Where,
- Simple Interest – SI
- Principal (amount invested) – P
- Interest Rate (in %) – R
- Tenure – T
For example, if you invest a sum of Rs 1,00,000 for 3 years at a 10% yearly interest rate, then at maturity,
Maturity Amount = Rs 1,50,000
What is Compound Interest?
Compound interest is the interest you earn on principal and interest.
The formula for compound interest:
A = P (1+r/n) ^ (n * t)
Where,
- Maturity Amount -A
- Principal amount – P
- Rate of Interest (in decimals) – R
- Number of compounding in a year – N
- Total years – T
For example, if you invest a sum of Rs 10,000 for 3 years at a 10% compound rate of interest (quarterly compounding), then at maturity,
Rs. 13,449 (approximately)
Maturity Amount – Principal Amount
= 13,449 – 10,000
Rs. 3,449
Fixed deposit calculator has proven to be very helpful for investors. With an online FD calculator, it is easier to calculate the exact maturity amount, eliminating all possible manual errors. Overall, playing an important role in saving one’s time and effort.
