One of the popular ways to grow one’s capital is to invest in an FD. They help you accomplish your financial target safely, whether you are seeking to raise your income or choose to use your savings. Earlier, buyers just had bank FDs to pick. Due to the growth of NBFCs or Non-Banking Financial Companies, investors today have more investment opportunities.
Under the Indian Companies Act, 1956, NBFCs are registered. It offers numerous loan and investment solutions, with one of the most common investment choices, FD.
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Why pick an FD offered by NBFC?
The main factor behind the growing success of NBFCs is that relative to banks; they deliver interest rates on FD. As a risk-averse investor, it is better to opt for a bank FD. However, before spending your hard-earned income, you need to remember several other things. Some NBFC FDs points demonstrate why, relative to bank FDs, it is a better choice.
The rate of interest
Different banks and NBFCs offer a range of interest rates on FD, but the NBFC FDs usually offer a better return. In India, most banks offer an interest rate on FDs of 2 to 7 percent. And up to 0.5 percent higher interest on FD is given to senior citizens. The rate offered on the FD is 8.3 to 9 percent when it comes to FDs in NBFCs, which is up to 0.10 to 0.25 percent higher for senior citizen investors.
FD’s interest rate is not the only factor that investors weigh before taking a gamble with their cash. As the banks are regulated by the Reserve Bank of India [RBI], investors find it more secure when it comes to bank FDs. Their savings are protected up to Rs 1 lakh by the Deposit Insurance and Credit Guarantee Company.
However, a highly rated NBFC may be equally trusted as it shows how stable the business is. Credit rating agencies provide NBFC FDs with ratings based on the risk factor for the company’s market, financing, and management efficiency.
You must discover the company’s credit rating and hear about its business models before investing. After conducting an extensive analysis, you would be able to make an educated investment decision.
Early withdrawal option
Both bank FDs and NBFC FDs offer the facility for premature withdrawal. One exception, though, is that premature withdrawal are not allowed by a few private banks. NBFCs, on the other hand, allow withdrawal of money before the tenure of the investment is terminated. While individual firms have a mandatory lock-in period, as you can cancel your investment in a financial emergency, the NBFCs rate is higher than that of banks.
The premature withdrawal fines differ from one NBFC to another.
The minimum period of investment
Compared to a bank FD, the minimum investment tenure for an NBFC FD is longer, which boosts the FD yields and results in a higher return in the long run.
Investment choice via small monthly contributions
The benefit of investing with an NBFC is that you can do so by simple monthly deposits when you sign up for a Systematic Deposit plan. Just like SIPs, minus the risk factor, this strategy succeeds. This choice is perfect for young earners looking to develop their investments while still tackling other monthly expenditures.
Conclusion: In short, while bank FDs are low-risk alternatives providing income tax benefits, higher yields are offered by NBFC FDs. Apart from a competitive interest rate, when you opt for an NBFC FD, you get the Auto-renewal facility, which allows you to remain seamlessly invested for a long tenor Multi-deposit option, and to open multiple FDs with different tenors with a single search. You must ensure that you know all the essential facts before investing in an NBFC FD so that you can invest your money most safely and efficiently. Reach out to MyLoanCare to open an NBFC FD now.