Fixed deposit falls among the safest investment tools that banks and non-banking financial companies (NBFCs) offer. An investor can deposit money for a higher interest rate in this investment tool compared to a savings account. In this type of account, the money can be deposited at a fixed interest rate for a fixed term that can range between 7 days to 10 years. The interest can be earned as per the applicable terms and conditions. Investing in FD is a facile process and so is calculating the returns. Read on to know more!

An FD calculator assists you in calculating the interest and the total amount the FD holder will receive at the end of the tenure or maturity. This time and energy-saving tool make it easier for you to learn the interest you can earn on your deposited principal amount. Simultaneously, you can compare the amount of earned interest at various time intervals based on different amounts. It also helps you to choose the best plan to yield better returns.  

How does FD interest calculator work?

FD interest calculator works in a simple way. All you need is to insert the principal amount of deposit, duration and the interest rate. Now it is time to select the type of interest. Along with the frequency, you can either choose a simple or compound interest formula. After you have inserted the values in the FD calculator, the result is calculated immediately.   

Methods of interest calculation

There are two methods to calculate the interest on a fixed deposit. Those are-

Simple Interest

It is known as the easiest and quickest way to calculate interest. In this type of interest calculation, the interest amount is paid in the percentage of the principal amount during the investment period. The earned amount in this type of calculation will remain the same at the time of maturity.    

Compound Interest

This type of interest is calculated as a percentage of the revised amount. It is the original principal plus the accumulated interest of the previous periods. The earned interest of the previous years is added to the primary principal. This way, the principal amount is increased and based on this amount the next period’s interest is calculated. In terms of the compound interest formula, during the fixed deposit tenure, you can receive interest on both the principal amount and on the accrued interest.   

The FD interest calculator formula is as follows.

Maturity value: A = P (1+r/n) nt

Here ‘A’ stands for the maturity value of the investment along with the interest, ‘P’ stands for the principal investment amount, ‘r’ is the annual rate of interest, ‘n’ refers to the interest rate compounded each year, ‘t’ is the money amount in a fixed deposit for a chosen period and ‘I’ refers to the total amount of earned interest. 

For example, if a fixed deposit of Rs. 30,000 is booked for 10 years, you need to insert the details of your fixed deposit, select frequency and the type of interest on the FD calculator. If the rate of interest is 7% for a period of half a year, the maturity value of the deposit amount would be Rs. 60,289. 

Accumulated interest: I = A - P  

Here, ‘I’ indicates the accumulated interest, ‘A’ is the total corpus or maturity amount and ‘P’ is the actual investment amount. Going with the example given earlier, the total interest earned is Rs. 30,289. 

Benefits of FD calculator

• It saves time and energy during cumbersome calculations at various tenure.
• It is free of cost tool, so the customers can use it as many times as they need.
• It helps to compare returns.
• It gives accurate results. 

You can use the online FD calculator available on the internet. It will help you to compare all the FDs available in the market and make an informed decision.