Banks offer unique term deposits, which are known as Recurring deposits or RD. This works as an investment tool that lets one make regular deposits to get decent returns on them. Thus, these deposits hold a degree of interest with complete flexibility and ease of use. The account holder has to make the deposits of a particular amount each month to ensure they will have enough in future to meet any emergency.
A person can take a loan from 70% to 90% based on the deposit amount. However, the rest depends on the bank's individual terms and conditions. It is always advisable to take loans on the deposits as you will keep getting interest amount credited on the deposit as well. This lets you lower down your interest rate on the amount borrowed.
The customers can open an RD account where the interest rates are compounded quarterly. The term initiates from 6 months. This can be changed further to 3 months with a maximum period of 10 years. The minimum tenure would, however, vary from bank to bank. Some might have 24 months as the minimum duration.
The Indian residents and Hindu Undivided Families (HUF) can avail this opportunity. The banks also offer RD schemes to minors and kids under the supervision of their parents or guardians.
The banks offer compound interest on a quarterly basis. The interest is added to the principal amount. The next interest will be compounded on the both the principal as well as the prior interest.
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