A fixed deposit (FD) is a reliable, convenient, and safer option to save and earn on their deposits. One of the main benefits of a fixed deposit is you can withdraw the money at any time, but you will have to give up the interest on preterm closure. So, it is advisable to complete the entire tenure if you have decided to keep your money in a fixed deposit. FDs are not subjected to any market risks; thus, they allow you to save money without worrying about the ups and downs of the market.
There are different interest rates applicable to the type of chosen interest payout, which affects your overall gain. Since there are many interest payouts, you can choose one from them according to your convenience.
- Monthly payout: You receive the interest monthly up to the tenure completion. Generally, this payout option offers less interest, as you get only simple interest.
- Quarterly payout: You get an interest payout every three months, which helps you plan your expenses accordingly.
- Annual payout: You receive the interest annually until the term completion.
- Cumulative interest payout on maturity: Most depositors prefer this type of FD. Even banks offer the best interest rates on such FDs. In this, you get the entire interest value on the maturity of the deposit. You receive compounded interest by the end of the term.
While you have a basic idea about the fixed deposit, calculating the return can still be confusing. As the name suggests, a fixed deposit is not liquid money. It is fixed for an agreed term to get the maximum benefit.
However, before going in for an FD, people are often confused about the calculations related to the FD’s maturity amount, interest, and tenure. Here are the two possible ways to calculate your fixed deposit maturity amount and return!
Based on your principal amount, tenure, interest rate, and payout frequency, the two best ways to calculate are:
- Using a formula, you can easily calculate the amount manually by doing a little math.
- If you are not a math wizard and want a quicker solution, many fixed deposit calculators are available online to help you calculate quickly without any error.
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Manual Fixed Deposit Calculator
If you want to calculate your fixed deposit return manually, you can use a simple formula. It’s simple math using some basic information about the FD.
If you have opted for a short-term payout, then the formula will generally use a simple interest rate based on the bank. In that case, you will receive the calculated interest per month.
The simple interest rate calculation formula is simple since you will get monthly interest. For example, if your principal amount is INR 10,000 and the interest rate is 6%, you will get INR 600/12 every month, which is INR 50, since interest rates are applied annually.
On the other hand, the formula for compound interest is different since the interest rate is applied on the (principal amount) + (added interest) until the tenure ends. This way, choosing the cumulative payout on maturity is the best option to get maximum return.
For compounded interest, the formula would be:
In this formula,
- A= total amount received
- P= the principal amount
- R= the interest rate
- T= the tenure or term
- N= the frequency of the compound interest (it can vary depending on the bank)
This formula can help you get an idea about the estimated amount you will receive. This is a manual process, and there might be chances of error while calculating larger amounts.
Online Fixed Deposit Calculator
If you do not want to get involved in math and want an easy solution, you can use an online fixed deposit calculator to save your hassles. The online calculators are fast, efficient, and accurate. Just enter the principal amount, the rate of interest, tenure, interest payout frequency, and in some cases, the frequency of compounded interest. So, go ahead, and utilise the online fixed deposit calculator before finalising your FD.