Maximising your earnings: A beginner's guide to using fixed deposit interest calculators

by aleiday rjanssenJune 6, 2023
FD calculator

A balanced portfolio of assets is a good one. You should invest in equities instruments to build a long-term corpus. But fixed-income investment products are crucial as well. A fixed deposit (FD) is appropriate for this. You invest a lump sum of money in this instrument over a set length of time at a set annual interest rate. You receive both your principal and accumulated interest at the conclusion of the term. You can manage your regular household spending with the interest that is credited to your account on a monthly, quarterly, or annual basis. You need an FD interest calculator to calculate your interest earnings. FD returns may not be as high as those of stocks or mutual funds. But, the greatest benefit of fixed deposits is that they are essentially guaranteed and largely unaffected by market volatility.

The majority of non-banking financial institutions (NBFCs) provide a variety of fixed deposit kinds and lengths. You can choose the investment tenure. However, different organisations offer various interest rates. It becomes tough for you to decide which one to invest in when there are so many options. Since most FD characteristics are comparable, the interest rate becomes the main determining factor. However, the interest calculation can be time-consuming when comparing several FDs. Fortunately, using an online FD interest calculator makes this task simple.

How to use an FD interest calculator?

The amount of return you can anticipate at the conclusion of the investment period is automatically calculated by an FD interest rate calculator. Simply enter the following parameters to get started:

  1. Total amount invested
  2. Rate of interest on FDs
  3. Investment duration

All it takes is that. The built-in feature of the FD interest calculator will automatically inform you of your investment's return.

How does a calculator for FD interest work?

There are two different kinds of FD interest rates in India, which you must be aware of. The computation formula for each of them is shown below.

Simple interest:

A = P (1 + tr)

Here, A represents the entire amount you will get. P is the amount you initially invested. r equals the interest rate. T is the investment timeframe.

For instance, you invested Rs. 1 lakh for a year at an interest rate of 6% per year. 

P = 1,00,000

t = 1

r = 6% = 6/100 = 0.06

So, the maturity amount will be: A = 1,00,000 {1+ (0.06 x 1)} = 1,00,000 {1+0.06} = 1,00,000 x 1.06 = 1,06,000

Your total sum will be Rs. 1,06,000 using the aforementioned formula. Your interest will be calculated as follows: (A - P) = 1,06,000 - 1,00,000 = Rs. 6,000.

Compound interest:

A = P (1+r/n)nt

Here, A represents the entire amount you will get. P is the amount you initially invested. r equals the interest rate. T is the investment horizon. The compound interest frequency is n.

For instance, you invested Rs. 1 lakh for a year at a 6% annual interest rate with a half-yearly compounding frequency. 

P = 1,00,000

r = 6% = 6/100 = 0.06

n = 2

t = 1 

So, the maturity amount will be: A = 1,00,000 {1+(0.06/2)}2x1 = 1,00,000 {1+0.03}2 = 1,00,000 (1.03)2 = 1,00,000 x 1.0609 = 1,06,090

 Your total investment will be Rs. 1,06,090, and the interest you earn will be (A – P) = 1,06,090 – 1,00,000 = Rs. 6,090.

Utilising a variety of variables, the online FD interest calculator assists you in determining your overall returns. Using it, you can quickly evaluate the various FD rates to determine which is best for your need. Additionally, you can utilise it to make future financial plans for yourself.

Benefits of FD calculator:

Some of the main advantages of utilising the FD interest calculator are listed below:

  • Time-saving- Calculating interest rates is quick and simple with an FD calculator provided by the best financial institutions like Bajaj Finserv.
  • Accuracy- Using an online FD calculator, you can calculate fixed deposit interest without making any mistakes. 
  • Double check not required- Unlike manual calculations, verifying the calculation figures in this online tool is unnecessary.
  • Interest-rates comparison- You may compare the returns on various interest rates various financial institutions offer using a fixed deposit interest calculator.
  • Choose FD plan- Choosing the best FD plans and the proper maturity amount for you is made simple.
  • Flexibility and efficiency- The most effective tool to determine the recurring interest on your deposits at various tenures and amounts is the FD interest calculator. 
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