A financial crisis can come knocking on your door any day. We saw this first-hand after the onset of the pandemic. However, if you are well-prepared for any weather, you don’t have any reason to worry.
One way to prepare for any economic climate is to invest in a fixed deposit. Why? Since FDs are immune to market risks, they can serve as a saving corpus for rainy days. You also get financial protection, stability against volatile market cycles, and steady growth on your pooled money. However, that’s not all.
When faced with a sudden cash crunch, our savings corpus comes to the rescue. But what if you end up using all of it? In such a case, you can always redeem your equity instruments, but you may incur a hefty loss.
In contrast, a fixed deposit lets you access the invested money without a substantial loss. How? Well, because FDs offer ready liquidity.
Let us see how.
Don’t liquidate your fixed deposit even if you are pressed for funds. Instead, you can use the corpus as collateral and take a secured loan against it. Most banks typically offer 90% to 95% of the FD amount as principal amount, and that too, at competitive rates. They are usually a percentage or two higher than the FD rate.
If approved, you get the funds in your savings account immediately. So, you can access quick funds without breaking your FD.
Keep this option as a last resort. If nothing else works and you’re in dire need of cash, you can settle for a premature withdrawal. However, be prepared to pay a penalty fee.
If you think fixed deposits only offer security and nothing else, you’re in for a nice surprise. Here are some other benefits of investing in a fixed deposit:
It’s clear why fixed deposits are the preferred savings instruments for Indians generation after generation. If you, too, want to take advantage of their flexibility and security, just allocate a certain percentage of your portfolio to FD, and you’re good to go.