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An Overview On RD Calculator And Its Functioning

Recurring Deposit is an investment tool that will allow you to make regular monthly payments and save money for a longer tenure. You are free to choose the tenure and the amount of monthly deposit you are willing to make. It can be as per your financial requirement and convenience. A recurring deposit scheme is much more flexible than a fixed deposit scheme and it is preferred by those who wish to start an account for the purpose of investing money and building an emergency corpus.

Using a recurring deposit calculator proves to be helpful as it calculates the maturity amount for the specific fixed monthly deposit. It is available online and is very easy to use. All you have to do is provide details about the investment amount and tenure and click on Calculate button. You will also be able to calculate the monthly deposit amount for a certain maturity amount, keeping a specific tenure in mind.

Functioning of the calculator 

The RD calculator uses a formula to estimate your maturity amount. Interest on your deposit will be compounded quarterly. The formula is as follows:

M = R[(1+i)^n-1]/(1-(1+i)^(-1/3) )

You can provide the maturity value which is M and estimate the monthly deposit you will have to make, that is R. I is the rate of interest and n is the number of quarters. Now, if you invest Rs. 5000 every month for one year at 8% interest rate, your maturity amount will be Rs. 62,647 based on this formula.

Advantages of using the calculator

Recurring deposit calculator is easy to use and will give an accurate amount. If you try to calculate the maturity amount without this calculator, there could be chances of an error and it might not show the right amount. Therefore, a calculator is a must. Before you decide to invest in a recurring deposit, you can start with the amount you want to deposit, or the maturity amount you need and then estimate the same. The calculator will not have any errors and will use the prevailing interest rate to help you estimate the correct amount.

Benefits of RD 

  • You can use the RD calculator to estimate the amount of money you will have to deposit each month for a certain maturity amount. A recurring deposit can be used as a collateral for taking loans.

  • Recurring deposit has a high interest rate for senior citizens.

  • You can make a premature withdrawal under a recurring deposit for a small penalty.

  • It is possible to open an RD account for minors under the guardianship of the parents.

  • The biggest advantage of an RD is the flexible tenure. It ranges anywhere between one week to 10 years.

  • You decide the minimum deposit amount as per your convenience. It can be as low as Rs. 10.

Use the calculator before you make a deposit. It will save your time and effort and will give you an accurate estimate of the amount you are liable to pay for a certain maturity amount.

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Thursday, 09 July 2020

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