An emergency can arise out of the blue. For instance, a loved one who has met with a tragic road accident and needs to undergo surgery immediately. You may need enough money for the surgery in a short span of time to save your loved one’s life. Your investments help in such unfortunate circumstances. Hence, you should actively invest. Your investments impact your present and future financial standing.
Hence, carefully consider these aspects. If you have limited financial resources for investment in the present and big goals for the future, consider investing in a Recurring Deposit. It lets you make regular contributions based on your affordability and build a significant corpus over time. Here are the top benefits of an RD that makes it an incredible investment option:
Eliminates the need for a lumpsum amount
Investors, especially salaried ones, cannot make investments due to the absence of a lumpsum amount. If you are unable to invest for the same reason, explore RDs. As mentioned, RDs give you the freedom to make regular contributions to your investment based on your affordability.
Protection from interest rate swings
You earn a competitive RD interest rate on your deposits. Note that every bank offers a different interest rate. Hence, you need to learn about various bank interest rates, compare them, and invest with a bank offering the most competitive RD interest rates. This way, you can earn a substantial gain from your investment. They get locked once you have invested with the bank at a specific interest rate.
This means you need not worry if the interest rate increases or decreases during the course of your investment.
Loan facilities
Suppose you have a financial requirement and do not wish to break your investment. How do you arrange the necessary funds? Consider applying for a Loan against Recurring Deposit. Leading banks offer up to 80-90% of the RD value as a Loan amount, which could be sufficient to meet your financial requirements.
You can get a Loan at a competitive interest rate and a flexible tenure and repay it in Equated Monthly Instalments. This ensures you do not feel burdened with the Loan repayment.
Financial discipline
In modern times, we all struggle to maintain financial discipline. You may be tempted to partially withdraw from your investment to buy the latest smartphone. Investing in RDs instils financial discipline, as you are penalised for missed contributions and discouraged from making partial withdrawals. This keeps you focused on achieving your investment goals.
While you cannot make a partial withdrawal, you can opt for a premature closure. This ensures you can access your money during emergencies. However, you need to pay a penalty for a premature closure and could lose interest while doing so. Hence, think through before opting for a premature closure.