Investing in Corporate Fixed Deposits? Here are Four Points to Remember - THEBLAGUARD


Thursday, July 19, 2018

Investing in Corporate Fixed Deposits? Here are Four Points to Remember

Investing in Corporate Fixed Deposits? Here are Four Points to Remember

Investing your income ensures certain stability in one’s finances. Merely savings is not going to ensure financial security or be enough to face future inflation in commodity prices! One could always look to diversify their investments and yield higher returns.

A corporate fixed deposit raises funds from public after getting approval from the RBI. These funds are usually in the form of a fixed deposit. Apart from banks or mutual funds, corporate FD offer higher rate of interest.

Corporate FDs follows the similar pattern of investing money for a fixed period. Bank fixed deposits are popular as it is considered reliable. However, corporate fixed deposits can also be considered by investors after gaining knowledge of its benefits as well as limitations.

Always Consider Company’s Credit Score

Investors should always opt for well reputed firms. It is advised that they opt for companies with AAA rating and even consider ratings from other agencies. It should always be kept in mind, not to opt for companies based on the word on street or its popular products.

Consider the Tax Bracket

Be aware that if an investor falls in the tax bracket of 30%, then the returns may not be as beneficial as even the higher FD interest rates could not cope up with the current inflation. Hence, it is advisable for them to look for other investment options. Debt mutual funds or tax-free bonds could be better alternatives. 

Aware of the Risks

Corporate Fixed Deposits are generally ‘unsecured loans.’ An unsecured loan is a concept wherein funds are raised based on the borrower’s credit worthiness and no collaterals are offered as a security measure. Unlike bank fixed deposits which offer security up to Rs. 1 lakh, a corporate fixed deposit does not offer such facility. Also, since none of the company assets are pledged, the same could be used for future fund-raising purposes.

Closure of Corporate FDs

A corporate fixed deposit does not allow pre-mature closure before 6 months. Unlike banks which allow you to close anytime, corporate FDs charge you penalties. Bank FDs only charge you for premature withdrawals. The process of closing corporate FDs is also tedious. There are many fixed deposit options.

However, the challenge is always to find a reliable option and the one which suits the investors needs after doing all the risk assessment and proper research. Among the few known corporate FDs in terms of consistent performance and delivery is Bajaj Finance Fixed Deposits.

It helps grow your savings, while offering safety of your principal amount. Its flexibility tenor ranges from 12 to 60 months, as per the financial needs of the individual. In addition, it offers attractive FD interest rates, which can offer greater returns to you. Within the flexible tenor options, an investor can opt for a 15-month special tenure FD which offers 0.25% more than the rate of interest of a regular 12-month FD.

Senior citizens can also greatly benefit from company fixed deposit. They are eligible for an additional rate of interest as high as 0.35% which is considerably higher than the regular rate of interest. The minimum deposit under Bajaj Finance is Rs. 25,000. This makes it easier for investing. Compared to other fixed deposit schemes, it doesn’t ask for a larger corpus. Among its other features is the NBFCs FD Calculator. It allows you to calculate your returns even before investing.

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