How to withdraw funds from a premature fixed deposit?

How to withdraw funds from a premature fixed deposit?

Fixed deposit investments can be the best option when it comes to investments. Fixed deposits are the investments which involve low risk and also give you high returns. This makes the investment safe if you are a first-time investor. 

Investments are done when you have a surplus income coming in. The surplus income can be from a salary raise, a huge business profit or even from an old age pension. Investing your surplus income can any day benefit you with extra funds which would not be the case if you go for savings. Saving your funds can be a bad option as it won’t benefit you with as much returns.

The interest rates offered on your fixed deposits are higher which is why you benefit with high returns. Now interest rates depend on the amount you invest as well as the tenure period of your fixed deposit. The rate of interest on an FD also differs from banks to banks. If in case you have landed with a lump sum amount which is to be invested, you can invest it in parts in different fixed deposit accounts.

But many-a-times investments are done blindly without thinking upon it. Before investing you should also know how we can save our funds over an FD investment. In order to get more funds for your investments, it’s important you also get higher interest rates on the funds you invest.

The extra fund which you get can be used during a financial emergency. And a financial emergency can knock on your door at any time. A financial expense can be either required for a medical emergency or something else.

During such a financial emergency you would, of course, rush to the funds you have invested in a fixed deposit. But in order to get this fund out, you have to break your FD account as a fixed deposit investment restricts you from withdrawing the invested sum. You have to break your fixed deposit account in case you need some funds urgently and before the maturity of the account.

You are unable to withdraw the funds before the fixed deposits reach maturity. But in case if you break the FD you will be offered fewer interest rates in future. Now, this is just not it, you will also be asked to pay a penalty amount by the bank if you break your fixed deposit.

In order to avoid the penalty and the drop down of low-interest rate, you can write an overdraft. Now banks provide you with overdraft facility wherein you can escape from breaking your FD account. By drawing an overdraft you can withdraw the amount you want in the case of a financial emergency.

This overdraft helps you a lot when a financial emergency knocks on your door. Under an overdraft facility, one can withdraw up to 90% of the amount from the fixed deposit. But you also need to pay an interest which is above 100 basis points.

For example, you have a fixed deposit of INR 1 lakh for a period of 3 years having an interest rate of about 9% and you have written a cheque of INR 10,000 for a period of 10 days. You need to repay the amount on the 10th day along with the interest. Notably, this will not affect your interest rate on your fixed deposit account in future.

Hence, an overdraft facility can save you from breaking your premature fixed deposit account in case of a financial emergency.

Category Finance

Multimag Comments

We love comments
No Comments Yet! You can be first to comment this post!

Only registered users can comment.