FD Calculator: How does FD Calculator work?
What is An FD Interest Calculator?
An FD or fixed deposit is an excellent choice when it comes to investing your money over a long period. These deposits typically offer a higher interest rate compared to other short-term deposits. Most NBFCs (Non-Banking Financial Companies) and banks offer FDs that are subject to a lock-in period ranging between 7 days to 10 years. The FD interests calculator takes into account several important factors that are discussed in the next few sections. You may use this to determine how much you should invest today to reap a certain amount of return on maturity.
Benefits of Using an FD Interest Calculator
If you are going to invest your hard-earned money, then it is an unsaid expectation that you would want to know how much return you will get and calculating interest on any investment can be complicated since there are too many factors involved. In such cases, an online FD interest rates calculator can come in handy. Here is what an FD Calculator can do:
- Break down complex FD maturity calculations that include multiple variables.
- Give you accurate figures just by inputting a little information online.
- Save you a lot of time.
- Help you compare returns offered by different NBFCs and banks.
FD Interest Rates Calculator Formula
The FD interest calculator calculates the return on investments based on two types of interest accrued.
Simple Interest
The interest accrued on an FD that is pre-decided for a fixed period is called simple interest. It formula is,
SI (Simple Interest) = [P (Principal amount invested)xR (Pre-decide Rate of Interest in %)x T (time of the FD)] / 100
So, for example, if you invest INR 10,000/- at a fixed rate of interest of 10% P.A. over 3 years, then the interest accrued at the time of maturity will be,
SI = [10000x10x3]/100
= INR 3,000/-
So, your maturity amount will be = Principal amount + SI = INR (10,000+3,000)/- = INR 13,000/-
Compound Interest
When you earn interest on both the amount invested as well as the accrued interest, you earn compound interest. Its formula is given by,
A (maturity amount) = P [principal amount] x (1+r/n) [r=rate of interest, n=number of compounding in a year] ^ (nxt) [t=number of years]
So, if you invest INR 10,000 for 3 years at a compound interest rate of 10%, then the matured sum will be,
A = 10000 {1+(0.1/4)} ^ (4*3)
= 10000 (1+0.025) ^ (12)
= 10000 (1.025) ^ (12)
~ Rs. 13,449/-
The compound interest earned as per the FD interest calculator is thus,
CI = A – P
= 13449 – 10000
= INR 3,449/-
How to Use An FD Interest Rate Calculator?
Using an FD interest calculator is simple. You should have some basic information handy before using the calculator. Most important of these are,
- Deposit tenor.
- Principal amount.
Other information that you will need to input into the FD interest rates calculator is,
- Type of customer.
- Type of FD.
Once you have entered these data online, the FD interest calculator will automatically give you the interest amount, and thus the maturity amount as well.
Factors that Influence FD Interest Rates
All NBFCs and banks that offer FDs will take into consideration a few important factors that affect your maturity amount.
Deposit Tenor
The deposit tenor is the total amount of time that you invest your money. Typically, the respective banks decide this tenor which can range from 7 days to 10 years. Depending on the FD tenor, your interests may vary.
Your Age
Your age or the primary applicant’s age also plays a crucial role in determining FD interests. AN FD interest rate calculator will automatically consider preferential interests to senior citizens ranging between 0.25% to 0.75%. The standard age limit for this is 60, while some banks consider investors of age 55 years as senior citizens.
State of the Current Economy
Repo rate by the RBI (Reserve Bank of India) and inflation are other important economic factors that affect the FD interest calculator.
Maximizing Returns on Fixed Deposits
While the interest rates on FDs might be fixed, there are ways to maximize the return on your investments. You can try out a few possible ways to do this –
- Deposit amount: The FD interest rates calculator will automatically yield a higher maturity amount if the principal amount is high.
- Deposit tenor: If you keep your money invested for a longer period, you will get a higher interest.
- FD type: Cumulative FDs yield a higher interest compared to non-cumulative FDs.
- Interest frequency: Frequent compounding of interest may eventually lead to a decreased maturity amount. Interest can be compounded annually, half-yearly, quarterly, or monthly.
- Age: Senior citizens typically enjoy a slightly higher interest rate compared to others.
Online FD interest calculators are usually free and give accurate results. They save you a lot of manual work, and even compared interests across NBFCs and banks. The latter helps you make an informed choice about where to invest your money. NBFCs like Piramal Finance are a great finance option if you are looking for loans or information related to investments.