When investing in Fixed Deposits (FDs), you need to have an understanding of how much you will earn. This information helps you adjust your investment or tenure to make sure that when the FD matures, you have the funds you need. But how do you know the amount of interest you will earn? That’s where an FD rate calculator helps you.
It is an online tool that lets you quickly and accurately estimate the maturity value and the interest income from your FD investment. It takes the guesswork out of your financial planning.
Why Use an FD Rate Calculator?
Before depositing your funds, you should know the potential returns to ensure that it is a good investment. Calculating interest manually can be tricky and time consuming, especially when you have various interest compounding frequencies (such as quarterly or annually), but an FD calculator makes it easy and instant. With just a few pieces of information, you know exactly what you will have when the tenure ends.
How the FD Rate Calculator Works
The calculator uses the FD interest formula on the following values you enter:
- Principal Amount: This is the amount you want to invest.
- Tenure (Investment Period): This is the time for which you want to hold the money deposited, in months or years.
- Interest Rate: This refers to the rate of interest per annum and is generally available on the issuer’s website or in their FD scheme information.
- Compounding Frequency: This is the frequency at which the interest is computed and it typically is quarterly, half-yearly, or yearly.
For instance, assume you wish to invest ₹1,00,000 for 5 years at a rate of interest of 7.5% per annum, compounded annually. You would input these figures into the FD rate calculator, which will then calculate the estimated total interest you will earn and the maturity amount.
Step-by-Step Guide to Use FD Rate Calculator
Using the tool is easy. Here’s a general overview of what you need to do once you have the fixed deposit calculator page open:
- Enter the particular amount you want to invest. For example, if you want to invest ₹5,00,000, you enter that.
- Choose the period for which you want to open the FD. You might select 3 years. If the calculator uses months, you’ll need to input 36. This is crucial, so ensure that you enter the tenure properly.
- Enter the interest rate and compounding frequency. Choose the proper compounding frequency (e.g., quarterly) since it has a direct influence on the overall earnings. The interest rate is often automatically added, but double-check it with current rates by the issuer.
- Check the estimates of the total interest and maturity amount of your FD investment.
- Redo the process with different values until you get the desired maturity amount.
Using an example for simplicity: If your computed figures indicate a total interest of ₹1,30,000 on an initial principal of ₹5,00,000. Your maturity value would be ₹6,30,000 (₹5,00,000 + ₹1,30,000). If you want more, invest more or for a longer duration. If you want less, invest less or for a shorter period.
Using an FD rate calculator is the fastest and most accurate method of understanding your returns, which will enable you to make informed choices. But, ensure that you use an FD rate calculator from a credible source or financial institution, such as Mahindra Finance, for the best estimates. This will help make sure that you are not faced with problems that result from investments based on incorrect estimates.
