Term Deposit Vs Fixed Deposit: Which One To Choose?

When it comes to saving money, two popular options often come to mind: term deposits and fixed deposits. While both offer the security of fixed returns, understanding the nuances between the two can help you make an informed decision aligned with your financial goals. In this article, we’ll explore the key differences between term deposits and fixed deposits, factors to consider when choosing between them, and how Airtel Finance can help you make the most of your savings.

Understanding Term Deposits and Fixed Deposits

What are Term Deposits?

Term deposits, also known as time deposits, are investment instruments where you deposit a lump sum for a fixed tenure at a predetermined interest rate. Key features include:

• Fixed tenure ranging from a few weeks to several years

• Guaranteed returns as the interest rate remains constant throughout the tenure

• Offered by banks, NBFCs, and post offices

• Ideal for short to medium-term savings goals

What are Fixed Deposits?

Fixed deposits (FDs) are similar to term deposits but typically have longer tenures. Here’s what sets them apart:

• Longer tenures ranging from 7 days to 10 years

• Higher interest rates compared to savings accounts

• Offered by banks, NBFCs, and post offices

• Suitable for medium to long-term savings goals

Factors to Consider When Choosing Between Term Deposits and Fixed Deposits

Interest Rates

One of the primary factors to consider is the interest rate offered. Generally, fixed deposits offer slightly higher interest rates compared to term deposits, especially for longer tenures. For example, a 1-year term deposit may offer 6% interest, while a 1-year FD could offer 6.5%.

Tenure Flexibility

Term deposits provide more flexibility in terms of tenure options. You can choose from shorter tenures like 3 months, 6 months, or 1 year. This makes them ideal for short-term savings goals or if you anticipate needing the funds in the near future.

On the other hand, fixed deposits have longer tenure options, making them suitable for long-term goals like saving for a child’s education or retirement. With Airtel Finance, you can open an FD with tenures ranging from 12 months to 60 months, with attractive interest rates of up to 7.5% p.a.

Premature Withdrawal

Both term deposits and fixed deposits allow premature withdrawal, but with certain conditions. Term deposits may have lower penalties for early withdrawal compared to fixed deposits. However, it’s essential to check the specific terms and conditions of your chosen financial institution.

With Airtel Finance, you can easily withdraw your fixed deposit prematurely online. The revised interest rate will be 1% lower than the original rate or the base rate applicable at the time of booking the FD, whichever is lower.

Loan Against Deposit

Many financial institutions offer the option of availing a loan against your term deposit or fixed deposit. This can be helpful in case of urgent financial needs without having to break your deposit. The loan amount is typically a percentage of your deposit amount.

Airtel Finance offers loan against FD, where you can get a loan of up to 75% of your deposit amount. The interest rate on the loan is 2% higher than the FD interest rate, making it a cost-effective borrowing option.

Choosing the Right Option for Your Financial Goals

Short-Term Goals

If you have short-term savings goals like creating an emergency fund, saving for a vacation, or a down payment for a car, term deposits can be a suitable option. You can choose shorter tenures and enjoy the flexibility of reinvesting the maturity amount or using it as needed.

For example, if you’re saving for a vacation next year, you can open a 1-year term deposit. Upon maturity, you can use the funds for your travel expenses.

Long-Term Goals

For long-term savings goals like retirement planning, a child’s higher education, or buying a house, fixed deposits can be a smart choice. With longer tenures and higher interest rates, your money can grow steadily over time, providing a substantial corpus when you need it.

Let’s say you’re saving for your child’s higher education. You can open a 5-year fixed deposit with Airtel Finance and earn up to 7.5% p.a. interest. By using the Airtel Finance FD interest calculator, you can determine the maturity amount and plan your investments accordingly.

Laddering Your Investments

One effective strategy is to ladder your investments by splitting your savings into multiple term deposits or fixed deposits with different tenures. This way, you can benefit from both short-term liquidity and long-term growth.

For instance, you can divide your savings into three parts:

• 30% in a 1-year term deposit for short-term needs

• 40% in a 3-year fixed deposit for medium-term goals

• 30% in a 5-year fixed deposit for long-term objectives

By laddering your investments, you can ensure a regular inflow of funds while still enjoying the benefits of higher interest rates on longer-tenure deposits.

Conclusion:

Choosing between a term deposit and a fixed deposit depends on your specific financial goals, investment horizon, and liquidity requirements. While term deposits offer more flexibility for short-term needs, fixed deposits provide higher interest rates and are suitable for long-term wealth creation.

Airtel Finance offers a convenient FD interest calculator to help you estimate your post-tax returns and make informed investment decisions.

Here’s why you should consider investing in an Airtel Finance FD:

1. Attractive interest rates up to X% p.a.

2. Tenures ranging from Y days to Z years

3. Convenient online account opening process

4. Minimal documentation required

5. Automatic renewal option available

6. Loan against FD facility for liquidity needs

To get started, all you need is a PAN card, Aadhaar card, and a canceled cheque. Visit the Airtel Finance Fixed Deposit page to explore the interest rates, required documents, and loan against FD options.

FAQs:

1. Which is better, term deposit or fixed deposit?
   The choice between a term deposit and fixed deposit depends on your financial goals and investment horizon. Term deposits offer more flexibility for short-term needs, while fixed deposits provide higher interest rates for long-term savings.

    

2. What is the difference between FD and term deposit?
   The key differences between FDs and term deposits lie in their tenure options and interest rates. FDs typically have longer tenures and offer slightly higher interest rates compared to term deposits.

    

3. Are TD and FD the same?
   While term deposits (TDs) and fixed deposits (FDs) are similar investment instruments, they differ in terms of tenure flexibility and interest rates. TDs have shorter tenure options, while FDs offer longer tenures and higher interest rates.

    

4. What is a fixed term deposit and a term deposit?
   A fixed term deposit, also known as a term deposit, is an investment instrument where you deposit a lump sum for a fixed tenure at a predetermined interest rate. The interest rate remains constant throughout the tenure, offering guaranteed returns.