If you withdraw the FD amount before the tenure, then you are sure to lose your money due to the penalty imposed by the banks.
Fixed Deposit i.e. FD has been considered a better means of traditional investment in India. People also invest in it because they get fixed returns and the security of the investment is also assured. But it is seen that many investors withdraw their fixed deposits before maturity even without any reason. Experts believe that this is actually not a wise decision. Doing this can be counterproductive in some cases. Instead of breaking the FD in advance, you can remain invested by adopting some methods, the benefit of which will be yours.
Fixed deposit account
Fixed deposits are one of the safest options to invest. An FD account can be opened by any Indian citizen. In these, senior citizens and even non-resident Indians i.e. NRIs can also open accounts. FD scheme facility is provided by banks, in which a person can contribute a lump sum amount for a fixed period and earn a fixed interest rate. It is mandatory for people who invest in FD to get guaranteed returns when the FD matures.
Why breaking fixed deposit is not the right decision
It is not right to break the fixed deposit prematurely because, if you withdraw the FD amount before the tenure, then you are sure to lose your money due to the penalty imposed by the banks. It has been observed that mostly a penalty of one percent of the deposited amount has to be paid. However, this may vary from bank to bank. According to Groww, yes, it is advisable to break your FD only if you are confident of replacing your FD with other investment options or in case of an emergency. Otherwise, it is not a good idea to do so.
What can you do instead?
To manage your immediate expenses or needs, you can explore some other alternative options without breaking your FD. A suitable way to invest in FD could be to divide the principal amount into smaller parts and invest them in different fixed deposits. This is much better than investing all the money in a single fixed deposit. That means you are not dependent on a single FD and can withdraw money from a small FD in any emergency. The remaining amount remains safe in another FD.
Additionally, short-term liquidity can be increased if you take a loan against your FD account. You can take a maximum loan of 90 percent of your FD amount. In most cases, the interest rates for this loan are much lower than any other regular loan. You can choose the option of credit card instead of FD. Some banks have productive credit card options that you can choose against a minimum fixed deposit of Rs.
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