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HomeMoneyHow is RD interest calculated?

How is RD interest calculated?

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Everything you need to know about a recurring deposit is right here! RDs have been quite popular and around for a while now. Though they have been around for this long, the popularity is nothing close to diminishing. Moreover, it is on the A list when it comes to assurance and a guaranteed return. People from any age group could rely on investing in a recurring deposit. What makes it this popular? How can one calculate their returns for an RD? Let’s find out.

What is an RD?

Let’s brush up on the basics. A recurring deposit means making a regular deposit. It is a scheme that is given by banks. It is also an option for its customers to make a regular deposit and earn a decent amount of return on the investment.

An RD account is a bank or postal service, where the depositor puts a certain amount of cash each month for a particular time frame, which usually goes from a year to five years. The process of making these small deposits every month lets the account holder build an appealing sum at maturity. But how does one know the interest they would earn over their RD investment? Here is how you can find that out.

Calculating Interest on Your Recurring Deposit

There are two ways you could find the maturity and interest value behind an RD scheme. You can do it either before you choose to invest in it, or when you want to know how much you would be taking with you at the maturity of a scheme you have already invested in. They are:

  1. RD Interest Formula
  2. An Online Recurring Deposit Calculator

How to do it by yourself?

We have all done the math to calculate various investments or say even basic day-to-day stuff in our lives. But if you have ever wondered how to know how much you would be earning on your investment in an RD, then this is how.

There is a formula that is used to calculating the amount at the maturity for a deposit over a certain period of time.

The formula is: A = P*(1+R/N)^(Nt)

Representatives of this formula are:

  • A = Maturity Amount
  • P = Principal Amount
  • R = Rate of Interest
  • N = Compounding Frequency
  • T = Tenure

With this, you can substitute the constituents of your RD and figure the answer out.

How to do it with a recurring deposit calculator?

Well, you know how to do it manually, and it may seem simple, but not everything is what it seems, does it? You could rather use an online calculator that can get the work done for you in a matter of seconds. You can use the calculator to find the interest rate, the maturity you would earn, and more.

Here is how the calculator works;

On the calculator, you just need to enter the following details:

  • Monthly deposit
  • Tenure
  • Interest rate

With this, you instantly find the answer to your total investment, the wealth you have gained, and your total maturity amount. It is as simple as that, no confusing math to do or the need to sit for a long time and do all the hard work with your head.

Calculating rd interest

What Makes RDs So Popular?

Well, after all these years, recurring deposits have not gone down in demand, and they are, without a doubt, a promising investment with good returns. For the past few years, RDs have been market trends because of the following reasons:

➔ They are useful for short-term goals.

➔ They are an investment with advanced features and are always reliable. ➔ They carry along a good interest rate.

➔ They are an easy investment.

➔ They also come with flexible plans.

RD is Suitable for –

All of us do not have a big fancy amount at hand to lock up and earn interest over it. That is why many choose an RD. Who would this RD be the perfect match for:

– It is a good choice for investors who would like to pay installments in modest quantities.

– It is a scheme that matches individuals who have a financial goal to meet in a certain time period.

– People who would like to earn good interest on their investment, but at the same time also want it to be risk-free and guaranteed.

– It is also the best choice for a disciplined investment because a regular payment is a great way to keep investments on track, and the investor would be obligated to set aside the installment amount every month.

– If you want to invest but do not want to carry a heavy load around, then again, this would be the right choice for you. An RD can be opened based on your requirements.

– It is a suitable choice even if you want to be a minor investor. These accounts can be opened by any minor who is above the age of ten.

– You will also be eligible for a loan against one of your recurring deposits. The loan can be up to 95% of the deposit, and by which you can even choose to have money during an emergency.

– It is a hassle-free start for you as an investor. You do not need to have huge savings in order to start this investment. You can just start off right away.

– When it comes to Tax and a recurring deposit, you can avail the benefits of TDS.

– You can also have your recurring deposit nominated. The money goes to the right person in uncertain circumstances.

To Sum Up

Now that you know how it works, it would not be hard to find out how much interest you will be earning on your recurring deposit. You can get your head on whether an RD is a

suitable scheme for you. Along with that, once you know the end result of an investment, you can derive the option of knowing whether or not it would go with your financial goal.

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