A term deposit is one of the ways of investing money alongside options like savings account, shares and property. A term deposit is a fixed sum of money that is invested for a fixed amount of time in return for a fixed amount of interest. Term Deposit is also known as Fixed Deposit.
It is one of the most secure options of saving or investing money as its rates are risk averse and are not subject to market fluctuations. The deposits are however locked-in till the maturity period and any premature withdrawal is subject to charges or penalties. If the investor wishes to receive the interest income before the time of maturity, they can opt for a plan which provides the interest during weekly, monthly, quarterly or yearly intervals. Term Deposits can be availed through financial institutions like banks, Non-Banking Financial Companies (NBFCs), credit unions and building societies.
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The various types of term deposits are listed below:
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Listed below are the advantages of investing money in a term deposit:
The interest that is paid by the financial institutes and banks on term deposits differs from one institute to the other. The interest rate offered for term deposit plans ranges from 5% to 8%. The latest data indicates that some banks like IDBI bank, Kotak Mahindra and Yes Bank provides better interest rates on term plans. Some lenders also offer better interest rates on senior citizen schemes than normal term plans.
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Term deposit is a basic time deposit scheme in which an individual can deposit funds for a specified time period and earn higher returns than savings bank account. Special Term Deposits have special term periods like 333 days or 555 days. Special Term Deposits offer a better interest rate which would be higher than regular FDs. STDR stands for Special Term Deposit. The interest on STDR deposit doesn’t get paid each month or year, rather the interest is credited at end of maturity period.
In STDR the investor gets the additional benefits of interest on interest. The rate of return in case of STDR is a little higher because of the compounding interest. Hence it can be a little more beneficial for the investor.
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