A fixed deposit calculator is an online financial tool extended by leading financial institutions and NBFCs on their websites. An FD interest rates calculator is designed to help users determine the value of their fixed deposit on maturity and the estimated interest they are likely to accrue on their deposits. Typically, a fixed deposit calculator has an inbuilt scientific formula that helps users to compute complex fixed deposit calculations in a few simple steps without any manual effort.
All one needs to do is enter key investment information into the designed fields to compute fixed deposit returns accurately. This can prove useful for financial planning and streamlining investment.
Take a look at the article below to understand how FD interest rates calculators operate and how they make the most of it to plan investment in FD schemes.
Fixed Deposit Formula
The Fixed Deposit formula to determine the maturity amount is based on the type of FD account.
In other words, there are two types of fixed deposit accounts and one can find their maturity using an FD interest rates calculator:
- Simple interest FD
- Compound interest FD
Simple Interest Fixed Deposit Formula
A simple interest FD account’s interest and maturity amount can be computed using the formula given below –
M = P + (P x r x t/100)
In this formula
- P denotes the principal amount or deposit
- r denotes the interest rate p.a.
- t denotes the investment horizon or tenure in years
Example of Simple Interest FD Calculation
Rohit invests Rs. 1,00,000 in a simple fixed deposit account for 5 years at 10% interest. At maturity, Rohit will receive
M = P + (P x r x t/100)
M= Rs. 1,00,000 + (1,00,000 x 10 x 5/100)
= Rs. 1,50,000
He will receive an amount of Rs. 1,50,000 at the end of 5 years from his simple interest fixed deposit account.
Compound Interest Fixed Deposit Formula
Using the below-mentioned formula individuals can determine the compound interest and maturity of their FD scheme.
A = P (1+r/n) ^ (n * t)
In this formula
A denotes the maturity amount
P denotes the principal amount
r denotes the interest rate
n denotes the number of compounding
t denotes the tenure
Example of Compound Interest on Fixed Deposit
Karuna deposits Rs.10,000 in an FD account for 3 years compounded quarterly at 10%. On maturity, Karuna will receive the –
A = P (1+r/n) ^ (n * t)
A= Rs. 10,000 {1 + (0.1/4)} ^ (4 * 3)
A = Rs. 10,000 (1 + 0.025) ^ (12)
A = Rs. 10,000 (1.025) ^ (12)
= Rs. 13,449
The compound interest will be
= Maturity Amount – Principal
= 13,449 – 10,000
= Rs. 3,449
Note that an advanced fixed deposit calculator is pre-loaded with both compound and simple interest formulas. Based on one’s choice of fixed deposit they can select the type on the calculator and determine the interest and maturity amount right away.
Characteristics of a Fixed Deposit Calculator
Here are the key features and benefits of an FD interest rates calculator that help users in more than one way:
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Helps save time
While individuals can use the fixed deposit formula to determine the maturity amount and returns, the entire process is quite cumbersome. This is because of the involvement of several steps in the calculation which makes it time-consuming. However, a fixed deposit calculator can simplify the process as it comes preloaded with the formula and helps users determine the maturity amount almost instantly. This helps save users’ time and energy.
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Avoids manual errors
Lengthy steps are prone to silly mistakes in calculations. Even a small error can show incorrect information concerning maturity or interest amount. Thus, affecting financial planning. However, a fixed deposit calculator helps avoid such calculation errors effectively by following a formula fed into its system that computes FD returns accurately.
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Helps compare fixed deposit schemes
Since the FD calculator allows readjustments and offers results quickly, it can help compare different fixed deposit plans better. This will help them determine which plan offers them the best returns on their capital, thus allowing them to pick the most lucrative option.
While fixed deposit calculators help compute interest amount and maturity value they don’t offer real-time information like current inflation rate, gold price in India, and often even the prevailing FD rates. This is why it is crucial to find the required data in advance to ensure a smooth computing experience.
How to Use a Fixed Deposit Calculator?
Individuals can use a fixed deposit calculator in these easy steps:
Step 1: Visit the official website of a trusted financial institution
Step 2: Look for an FD calculator and click on the tool to access it
Step 3: Select the type of fixed deposit from the simple or compound interest fixed deposit option
Step 4: Enter fixed deposit variables like principal and tenure in specified fields
Once all the steps are covered the fixed deposit maturity amount and estimated interest appear on the screen. Users can readjust the variables to check how changing the return or deposit amount will affect the returns.
Major Benefits of Using a Fixed Deposit Calculator
Here’s how one can benefit from using a fixed deposit calculator to improve their financial planning:
- It helps users determine the final amount they are likely to receive at maturity
- Fixed deposits are easily accessible online and can be used for free
- The tool allows users to make multiple adjustments to help them find the best tenure and principal amount combination to accumulate a certain amount of corpus for their financial goals
- The FD calculator allows users to compare the fixed deposit maturity amount from different schemes instantly
Collectively, these features and benefits allow users to make an informed decision about their FD investment. This further allows them to plan their investment by giving them an idea of whether their returns would be sufficient to meet their projected goals or if they can benefit by increasing their deposit amount. Regardless, to achieve one’s financial goal individuals should try to diversify their investment portfolio to generate more returns and cushion market risks better.
