Recurring Deposits (RD) are very similar to Fixed Deposits (FD); here, in RD, instead of investing a lump sum amount altogether, you can invest in smaller contributions over a time period.
RDs motivate investors to save systematically on a monthly basis and earn interest on the accumulated amount.
This makes RDs a preferred option for salaried professionals, students, and individuals looking to build savings through regular investments with smaller contributions.
Difference between Recurring Deposit (RD) and Fixed Deposit (FD)?
Both FD and RD are for a similar type of investing style: risk-free and Predictable returns, but the difference between them is in the style of contribution. In FD, the lump-sum amount is locked-in for a period for a predefined period, whereas in RD, the contributions are made on a monthly basis.
What is an RD Calculator?
Definedge’s RD Calculator is an online tool to help you calculate the interest earned on savings and the maturity amount.
And the maturity amount can be simply calculated by using:
– Total Investment or Monthly Investment
– Rate of Interest
– Time Period or Tenure of the contribution
How to Use the RD Calculator?
Definedge’s RD calculator uses the standard RD maturity used by the banks, and anyone can calculate the RD maturity amount instantly.
FV = P*(1+R/N)^(Nt)
FV = Final Value or Maturity Amount
P = Principal
R = Rate of Interest
N = Counting Factor (Number of Quarters)
t = Time period
For example, if an investor wishes to deposit ₹10000 for 4 quarters, i.e 1 year, at an interest rate of 8%, here’s how the calculation will look:
FV = 10000 × (1 + 0.08/4)^(4 × 1)
FV = 10000 × (1.02)^4
FV = 10000 × 1.082432
FV = ₹10,824.32
₹824.32 is the interest accumulated over the monthly contributions, and ₹10,824.32 is the maturity amount that you will receive at the end of the tenure.
Benefits of using an RD Calculator?
– Instant results
– Better financial planning
– Compare multiple scenarios
– Error-free calculations
– Goal-based investing
Start making informed investment decisions with Definedge’s Free RD calculator.
Calculate the maturity amount, compare multiple savings schemes, and visualise your financial growth even before you start investing.
Frequently Asked Questions (FAQs)
1. If RD interest changes after I open my RD account, will my maturity amount also change?
No, as the RD is initiated, the interest rate is locked, and it won’t be changed even if the bank has changed the interest rates.
2. What gives better returns: RD or SIP?
RD return is fixed while an investor creates an account from Day 1, but SIP is a market-linked investment scheme; its performance is dependent on the performance of the asset that you have invested in. If you want to compare the returns of RD and SIP, then please check the Free SIP Calculator by Definedge.
3. Can I withdraw my RD before maturity?
Yes, most banks allow premature closure of RDs. It is good to confirm with the bank to know about the charges levied by them on premature closure of RD because every bank’s charges are different.