# How is Fixed Deposit Interest Calculated?

In a Fixed Deposit, you put a lump sum in your bank for a fixed tenure at an agreed rate of interest. At the end of the tenure, you receive the amount you have invested plus compound interest. FDs are also called term deposits. In fixed deposits, the interest is accumulated on the deposited amount in a stipulated amount of time.

In a Fixed Deposit, you put a lump sum in your bank for a fixed tenure at an agreed rate of interest. At the end of the tenure, you receive the amount you have invested plus compound interest. FDs are also called term deposits.

A fixed deposit is a type of term investment mainly offered by leading banks and NBFCs. These deposits provide a higher rate of interest that is subjected to certain terms and conditions. The amount you deposit in these investments will be locked for a predetermined period that can vary between seven days to ten years.

If you want to invest in fixed deposits, you should have a clear idea of the way in which the investment will grow over time. In simple words, you should know about the interest in fixed deposits and how it is calculated.

Nowadays, many people invest in fixed deposits as they provide investors with stable interest rates, special interest rates for senior citizens, and tax benefits. You should know how to calculate interest on a fixed deposit investment to implement proper decisions. Fixed deposits are suitable for those who want a risk-free approach to investments.

In fixed deposits, the interest is accumulated on the deposited amount in a stipulated amount of time. And as it is a risk-free approach, fixed deposits take longer durations to offer good returns. The interest rate on the amount deposited ranges from 3% to 9.5% based on financial institutions. Here are some ways in which you can pay interest rates on fixed deposits.

## Using a Fixed Deposit Calculator to Know the Interest Rate

Nowadays, you will come across online calculators that will help you derive the best interest rate. The fixed deposit calculator assists customers in deriving the total maturity amount for their account based on the rate of interest for a particular time period.

In most cases, fixed deposit calculators are easy to use. A fixed deposit calculator will help you compare the different tenures with varied interest rates from financial institutions and NBFCs.

With the help of a fixed deposit calculator, you can select a suitable amount and tenure. The amount and the tenure will offer clear insights to you on the desired maturity amount for the fixed deposit. Moreover, you should be aware of the ways to calculate fixed deposit interest without a calculator.

## How will you Calculate a Fixed Deposit Interest Rate?

The interest rate on the fixed deposits is fixed at the time you deposit the amount. Moreover, in a fixed deposit, the interest rate is not dependent on market fluctuations. Therefore, it is a low-risk financial investment tool.

Some financial institutes will let you break the fixed deposit early by incurring some form of penalty fee. You can use an online fixed deposit calculator to derive the interest rate. Moreover, it is essential to research the right type of financial institution to get higher interest rates.

## Ways to Calculate Fixed Deposit Interest Rates

The overall interest on your fixed deposit is calculated primarily on the principal amount deposited by you. Based on the type of deposit you select, the interest you’ll earn on your investment can be either simple interest or compound interest.

Note that in fixed deposits, the deposits are of two types- cumulative and non-cumulative. Here are some ways to calculate the interest rate on your fixed deposit.

• In the online calculator, you should fill the necessary details. For instance, you have to input customer types like general, senior citizen, etc. You should also input the FD investment amount and tenure in the formula in the proper places.

• The online calculator will derive the maturity amount for you instantly. It will also fetch the interest rate for your fixed deposit.

## Calculating Compound Interest with the Calculator

Compound interest refers to the interest on a loan or deposit. It is typically calculated based on the initial principal and the aggregate interest from the prior time period. Note that compound interest in a fixed deposit investment is usually the interest received on money already earned as interest.

It allows your interest and principal to grow at a faster pace than simple interest. The rate of the accumulation of compound interest is determined by the frequency of the compounding periods. The greater the number of compounding periods, the better will be the compound interest on a fixed deposit investment.

Compound interest is the process of getting interested on money that you’ve already invested. It is essential to have the below-mentioned data to calculate compound interest.

• The initial amount to be invested

• The rate of interest offered

• The number of years you want the deposit to stay invested

• The total number of times the interest is compounded yearly

Once you have all these datasets, you can easily calculate the compound interest with an online calculator.

By calculating the interest rate on fixed deposits, you can leverage your money properly. Every investor wants to know about the rate of interest they will be getting on the deposited amount. With the help of these strategies, you can easily calculate the interest on fixed deposits.

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