Fixed and recurring deposits are the two most popular guaranteed income investment instruments. In contrast to FDs, where you can deposit a large sum of money, RDs need fixed monthly contributions. RDs instill a regular investment habit in those who are earning a living. These foster discipline in saving practices as well. The majority of banks and financial institutions provide recurring deposits.
It might be difficult for the average investor to calculate RD returns consistently and accurately. An RD calculator will come in very handy in this situation. We will tell you more about the online tool here.
What is the Purpose of an RD calculator?
As the name implies, a recurring deposit requires regular investment. Investors may find it tough to monitor the returns on these deposits. The computations are multipart since there are numerous variables, and the interest is compounded every quarter.
An investor can determine the precise amount their deposits will accumulate after maturity using a recurring deposit account calculator, which will eliminate the burden of manually calculating its returns.
The TDS deduction is the only thing that the investor must perform manually. According to the new RBI regulations, RDs are also subject to TDS deduction; however, because there is no standardization in its application across financial institutions, RD calculators do not account for it.
Benefits of Choosing Recurring Deposits
- RD accounts are a type of investment product that calls for consistent monthly deposits over a predetermined period in exchange for an interest rate. An investor receives a lump sum payment together with interest when an RD matures.
- They resemble fixed deposits but include more frequent investing. RDs foster the habit of monthly saving and financial discipline among investors.
- Since fixed deposit rates vary from bank to bank, the same is true with RD. The interest rate for senior citizens is typically greater than for normal RDs. Quarterly compounding is used for interest. An RD account requires a minimum investment of INR 10, though this can differ from bank to bank. Ten years is the maximum term; the least is six months.
- Premature withdrawals are permitted but come with a cost. To receive 80–90% of the RD value, investors can borrow money against an RD (such as a company loan or a housing loan).
As the process of calculating interest on repeated deposits can be laborious and time-consuming, finance companies provide an online recurring deposit calculator that has the following benefits:
- Easy to Use: Using an RD calculator is really simple. Inserting the values for the monthly deposit, the RD interest rate, and investment tenure is all that is required. The maturity amount is appropriately calculated by the RD Calculator.
- Time-saving: An investor can save precious time by using an RD calculator. In a matter of seconds, it completes complicated calculations. As a result, the investor no longer has to deal with the hassle of laborious computations.
- Accuracy: If the inputs are provided correctly, the calculator is extremely accurate, and there is no chance of error.
- Future Planning: The calculator gives investors the precise worth of their investment, allowing them to plan their future accurately.
- Multiple Providers: Banks and other financial entities provide RDs. Investors can quickly compare the maturity values of several RDs using an RD calculator.
- Free to use: The RD calculator can be used numerous times by the investor to determine the returns from RDs with various tenures and interest rates.
Although recurring deposits are a secure investment choice with a largely assured return on investment, it is advisable to take the following aspects into account before opening an account for recurring deposits:
Interest Rates Offered: Banks offer different interest rates for various term lengths. Various banks often charge recurring account holders an interest rate that runs from 3.5% to 8.5% p.a. The chosen deposit tenure affects the return rates. So, choose the bank wisely.
Term Duration: A tenure between six months and a year is referred to as “short-term.” A tenure of one to five years is considered medium tenure, while five years or more is considered long-term tenure. Your returns are significantly affected by RD calculators. Therefore, ensure that the tenure you choose aligns with your financial objectives.
Premature Withdrawals: One of the most important things investors should think about when choosing the best recurring deposit account is how liquid it is. Premature withdrawal is permitted with RD, but the investor will be charged a penalty. Choose an investment that provides you a high rate of return and only a small fee if you want to cash out early.
If you plan to invest in recurring deposits, an RD calculator can be a handy tool. Now that you are enlightened about all the essential details related to RD calculators, you can make fast and wise financial decisions.