Fixed Deposits are one of the most safe investments available, as they provide guaranteed returns with no risk. Corporates, in addition to banks, offer fixed deposits, which are usually for a shorter period of time.
Fixed Deposits (FDs) are savings accounts that pay a higher rate of interest than conventional savings accounts. It is a form of term deposit in which the investor deposits a big sum of money and receives interest at regular intervals until the maturity date. FDs are one-time investments, and the investor is not required to make monthly deposits.
Banks offer a variety of fixed deposit investment alternatives to fulfill the demands of both short-term and long-term investors. Fixed deposits also come with a slew of advantages. The best thing about fixed deposits is that you know you'll earn a guaranteed return on your money. Furthermore, putting money into a fixed deposit is tax-free. Fixed deposits, in addition to being tax-free, offer investors freedom by allowing them to choose the FD's investment duration and amount.
You may be qualified for a loan on your FD based on your investment. You can close your Fixed Deposit and withdraw the funds immediately in the event of an emergency.
Several companies/corporates and NBFCs, like banks, collect and deposit money for a set period of time and pay interest. Corporate fixed deposits are the fixed deposits of firms and NBFCs. Corporate FDs, like other banks, pay a rate of interest on income and have the same variable duration to choose the amount. When compared to bank FDs, corporate FDs always deliver a better rate of return.
The table below can show you the differences between the two types of investments:
|
Particulars |
Bank Fixed Deposit |
Corporate Fixed Deposit |
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1) Returns of the Schemes: |
The most crucial consideration while making any type of investment is the expected return; this consideration also applies to fixed deposits in the form of the rate of interest. In contrast to corporate fixed deposits, banks give an average rate of interest. |
If you invest in corporate fixed deposits rather than bank fixed deposits, you can expect a higher and guaranteed interest rate over time. Another advantage of corporate fixed deposits is that they typically provide both cumulative and non-cumulative interest-based payouts. Interest is reinvested in cumulative interest payouts, resulting in higher payouts and compounding returns. |
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2) Tenure of the Investment: |
The term period of a bank fixed deposit ranges from months to years, which is significantly longer than that of a corporate fixed deposit. If you wish to invest in fixed deposits for a longer period of time, which is up to 10 years, bank fixed deposits are preferable to corporate fixed deposits. |
The tenure length is a significant component in determining how long an investment will get returns until maturity. The term period of a corporate fixed deposit is at most six months to five years. |
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3) Premature Withdrawal of the Funds |
Premature withdrawals incur a 1-2% interest charge from the bank. |
Not all companies allow you to withdraw your money before the three-to-six-month mark from the investment date. If a company withdraws from an offer before it is completed, no interest is paid on the deposit. Certain companies charge a penalty of 2% to 3% if you withdraw after six to twelve months. |
A fixed deposit is an ideal investment for investors with a low-risk tolerance who want to grow their money as safely as possible. Although there are numerous advantages of having an FD, here are a few of them:
Here are the benefits of investing in the corporate fixed deposit: