Fixed deposit accounts provide a stable platform for investors to earn a guaranteed return on investment on their deposits with low or no market risks. A fixed deposit or term deposit account comes with a tenure which can easily be opened and liquidated if needed (subject to charges and terms of the account). There are various types of FD accounts that provide tax benefits to the investors. An FD account has its own advantages and disadvantages which are outlined below to help you make an effective investment decision.

Advantages of Fixed Deposit

• Risk factors – An FD account provide relief to the investor by facilitating a safe platform for investment. The other investment avenues such as mutual funds, stocks, debt funds, unit linked insurance plans, etc. carry market risk based on the type of the investment fund. Considering the fact that the investment is safe with an FD account, the majority of investor choose FD accounts over other investment options. Moreover, RBI’s regulation for taking up an insurance on the FD account enables the investor’s account to be insured for up to Rs.1 lakh.
• Loan options – In the event of an emergency situation, the investor can choose to avail a loan on the FD account for a lower interest rate. The interest rates for such loans are typically lower than the market rate for other types of loans. Hence, an FD account can come handy when the investor needs to take a loan. Most FD accounts offer up to 90% of the FD value as the loan amount.
• Flexible interest payouts – Based on the investor’s requirements and type of the FD account, the interest is paid out at regular or periodical intervals. The investor can choose to receive the interest payouts on either annual or monthly basis along with an option to withdraw the interest at maturity.
• A higher interest rate for senior citizens – Most FD accounts offer a higher rate of interest for senior citizens which makes it popular even among the retired investors.