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Which Is Better For Investment? Recurring Deposit Or Fixed Deposit?

Published On Dec 11, 2021

Fixed deposits and recurring deposits are two of India's most popular investment options, especially for risk-averse individuals. The primary advantage of investing in a fixed deposit or recurring deposit plan is that the returns are assured and there are no risks. Many investors are unsure if they should invest in an RD or an FD.

What is a Fixed Deposit (FD)?

A fixed deposit, as the name implies, is an investment option in which both the investment period and the rate of interest are fixed. You can make a one-time investment at the start of the term, which usually lasts between 7 and 10 years. You'll get your principal back at the end of the term. You can opt to receive interest on your fixed deposit at regular intervals or when it matures.

What Is A Recurring Deposit(RD)?

A fixed amount is placed in a bank or non-banking financial institution each month in the case of recurring deposits. The interest rate is likewise fixed for the duration of the loan, which usually spans from 6 to 10 years. You'll get the principle back after the term ends. You can opt to receive the interest on your recurring deposit at regular intervals or at maturity.

Difference Between Fixed Deposits And Recurring Deposits

Following is the difference between Fixed Deposits and Recurring Deposits

  • Tenure

FD schemes usually have a duration of seven to ten years. The investor has the option of selecting a term that he prefers.

For a period of The duration of recurring deposits ranges from one to ten years. Over the course of the term, the consumer must deposit a set amount at predetermined times.

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  • Return on Investment

The interest rate for a year ranges from 6.96 percent to 8.00 percent. The interest rate is determined by the amount of capital and the length of time chosen. FD has a somewhat higher interest rate than RD.

For a one-year period, the interest rate ranges from 5.25 percent to 7.90 percent. The rate of interest is usually determined by the length of time invested and the amount invested each month.

  • Investment Methodologies

RD accepts the investment amount in installm

FD has a lump sum payment policy.

  • Withdrawal

When your term is up, you will be asked to leave. Withdrawals can be made early with a penalty.

When the opted tenure comes to an end. Early withdrawal carries a cost.

  • The Risk Rate

RD is a low-risk investment that is also safe.

FDs are a low-risk, low-risk investment option.

Take Away

A recurring deposit (RD) appears to be the appropriate fit for persons who do not have a large sum to invest in an FD but can afford to invest a modest portion of their income each month. Both the RD and the FD are best suited for risk adverse investors who are mostly in the lower tax bracket. Use an online recurring deposit calculator to figure out what works best for your budget. Although no single investment product may fulfil all demands, many people prefer an RD since it is less taxing and offers nearly the same returns as an FD.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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