Recurring Deposit is a fixed savings scheme where you deposit a fixed amount monthly for a specific period. The amount and tenure are dependent on the investor. However, the interest rate is fixed by the bank. The amount that you deposit earns interest, which is compounded periodically. Using an RD calculator smartly can be very beneficial to calculate the interest earned. Here is a guide on how to use an RD calculator to plan your investments:
Gather the details
To use a Recurring Deposit calculator, you need to fix the amount you plan to deposit, the annual interest rate, and the tenure. Additionally, you need to be aware of the compounding frequency, which happens monthly or quarterly. It majorly depends on the bank you choose.
Choose an RD calculator
There are many RD calculators available online. However, it helps if you always use an RD calculator of the bank where you wish to invest. Every bank provides different interest rates; you cannot change the interest rate displayed. If you use a calculator from the same bank, you can remain assured that your bank’s calculator will give the most accurate results. Most banks provide user-friendly and easy-to-navigate calculators.
Enter the data
Enter the gathered details into the RD calculator. You get different boxes to enter each detail. Enter the amount you plan to deposit each month. Next, input the annual interest rate offered by the bank, and lastly, specify the total number of months or years for which you will keep the RD active.
Calculate the results
Once you enter all the information, click on calculate to generate the results. The calculator will provide several key details, such as the total amount you will receive at the end of the deposit period. It will also display the interest earned after maturity separately. Some calculators provide a detailed segregation showing how much of your monthly payments have gone towards interest and how much towards the principal.
Analyse the results
Use the calculator to compare different deposit amounts, tenures, or interest rates to see how they affect your returns. It will help you choose the most suitable option for your financial goals. If you are unsatisfied, you can adjust the monthly deposit amount to see how increasing or decreasing impacts your maturity amount. You can plan your contributions according to your budget and financial goals.
Check different outcomes
Experiment with different outcomes to understand the impact of interest rates and tenures. Check how changes in the interest rate affect your returns. You can extend or shorten the tenure to check the maturity amount. You can even use calculators on a different bank website to check for any profit difference for the same tenure and amount.
Conclusion
RD calculators simplify the process of managing your funds. Remain vigilant and use the calculator to your benefit. It saves you time and makes your RD more profitable.
