A recurring deposit, or RD, as it is more commonly called, is a type of investment where you invest a fixed sum of money at a fixed rate of interest for a fixed duration of time. This makes it easier for you to know exactly how much you stand to receive as the maturity amount when the RD term ends. There are online tools that you can use to calculate this amount. The RD calculator online is free and easy to use. Read on to know more.
How does an RD calculator work?
When opening a recurring deposit account with a bank in India, you will need to use an RD calculator online to see what your earnings will be when the investment matures. The calculator is very easy to use and is available on all the websites of the banks which offer RDs as investments.
To use an RD calculator, you just have to feed in the principal amount you want to invest, along with the duration of the RD. banks offer a fixed rate of interest on RDs, so you get to know the maturity payment instantly.
Advantages of opening an RD
A recurring deposit is a very popular form of investment in India. It is a safe and easy-to-understand investment tool that gives you fixed returns. Some of the advantages of opening an RD include:
- Low principal –
An RD can be opened with an amount as low as INR 10. This is a huge advantage, as people from all walks of life can invest in an RD and earn assured returns. You need to deposit small sums of money periodically to build up the RD fund.
- Flexible duration –
The duration of the RD can be between six months and 10 years. This is very flexible and it allows you to choose the duration that you are comfortable investing for.
- Low risk –
As stated, an RD offers fixed returns, so the risk factor is completely negated when you invest your money in a recurring deposit. It is much safer than the riskier financial investment tools such as shares and equities.
These are the advantages that make the RD a preferred choice of investment for many people, especially those who do not like taking risks with their money.
RD vs FD
Both, a fixed deposit and a recurring deposit offer safe returns and allow your wealth to grow in an assured manner. However, there is one major difference between a fixed deposit and a recurring deposit. In a fixed deposit, you pay a lump sum amount of money as the principal and it earns the dividends for a fixed period of time.
In a recurring deposit, you need to deposit sums of money periodically in the RD account. In other words, the total principal invested is broken up into smaller instalments and paid into the RD that is already created.
When it comes to RD vs FD, you get to see some similarities. However, the mode of principal payment is the main difference. You need to see how much you can invest, and when you can invest it, and then decide upon an FD or an RD.
When it comes to RD vs FD, you can see that there are some very distinct differences between the two. Use an FD or RD calculator online to see what type of earnings you can have from both and then select the investment that is better suited for you. Invest your money in a safe and secure way and earn the returns that you are entitled to.