Fixed deposits are the most preferred investment options in India since they provide a sense of financial stability. But when emergency knocks your doors, you never know how much funds you might need. At such a time your investments are what come to the rescue.
Investing your money in FD at the right time and in the right place is of the utmost importance since that is what helps you grow and duplicate your money. It is a common myth that you need to be super rich to get more money. But in reality, you only need to have a good understanding of the current market situation and you need to take decision wisely.
The first thing that we think of when we have no funds in our bank accounts and we are in a state of financial emergency is to break our fixed deposits. But is it the right thing to do? There are a lot of things that you need to consider before breaking your fixed deposit.
Is it absolutely necessary?
The first thing that you should ask yourself before breaking your fixed deposit is if it’s absolutely necessary? Breaking your fixed deposit can have a very adverse effect on your financial stability and if you have opened only one fixed deposit, you might not have any other investment options to rely on.
The smarter thing to do when you have ample of funds is to break this amount into smaller amounts and invest these smaller amounts into different fixed deposits as well as investing them with different financial institutions or lenders. This will provide you with a sense of financial security even if it is absolutely necessary for you to break a fixed deposit..
Is there a way out of this?
Before you decide that you want to break your fixed deposit, think if there is a way out of it since a fixed deposit provides with financial stability and it also provides you with periodic income. If you are in a desperate need for some money, you can always opt for an overdraft facility instead of taking a personal loan or breaking your fixed deposit.
Overdraft facility is basically taking a loan against your fixed deposit. By opting for the overdraft facility, you will be able to withdraw 90% of the fixed deposit amount. If you opt for the overdraft facility, the term of this loan will be same the tenure of the fixed deposit.
Since this is a loan, you will have to pay back the money that you borrow in the form of interest. The financial institutions or lenders will decide your Equated Monthly Installments (EMIs) depending on your creditworthiness and your financial capability. Your monthly income and expenses is another thing that will affect your EMIs.
If you have some surplus amount, it is also possible for you to pay off the loan before your fixed deposit matures. The financial institutions or lenders generally do not levy any extra charges for closing the loan before the maturity of the fixed deposit.
One of the advantages of availing the overdraft facility is that you can still continue to receive returns on the fixed deposit amount that you had invested. But one of the major disadvantages of this facility is that once you avail this facility, you will not be able to break your fixed deposit account even if you want.
When you find yourself in a very difficult financial situation it is better to avail the overdraft facility. Overdraft facility provides you with better interest rates as opposed to personal loans and it is definitely better that breaking your fixed deposit.