FD vs RD: There are many options available in the market to invest your capital. However, before investing anywhere, one should study and compare all the available options. After this, according to your needs, you should choose the better option and invest in it. Term deposits are very popular in the country and most people prefer investing in RDs and FDs as it does not subject to market volatility and gives a fixed return.
Both Fixed Deposit and Recurring Deposit can be started in any bank or financial institutions. The tenure is fixed at the time of opening these accounts.
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Highlights of FD vs RD
- investment amount: If a person has a lump sum amount then he can invest in fixed deposits. On the other hand, if a person cannot arrange a lump sum amount and he is able to deposit a fixed amount at a fixed time, then the option of RD is better for him. In such a situation, RD is a better option for salaried people and people with low income.
- Period: The tenure of FD can be from 7 days to 10 years and the individual can choose the tenure as per his requirement. In case of RD, the minimum tenure is 6 months and the maximum tenure that an RD account can open is up to 10 years.
- interest amount: The interest earned on FD at the time of maturity is more than the interest earned on RD.
- Interest: Interest on FD is credited on quarterly or monthly basis or on maturity whereas interest on FD is credited at the time of maturity.
- Loan Facility: In this case FD and RD are same. Any person can take a loan against it up to 90 percent of the amount deposited in FD or RD account in case of emergency need of money.
- default clause: In case of FD investment, no person can ever default because the lump sum amount has been deposited in it at the very beginning. On the other hand, if the installments are not paid in the RD account for six consecutive months, then the bank has the right to close such RD account.
Note: The information given here is for information only and before taking any decision regarding investment, please consult your advisor.
(Source: HDFC Bank)