Fixed Deposits: How they Work and their Benefits

There are a variety of ways to increase your savings today, most of which, guarantees a higher return. Fixed deposits (referred to as FDs) is one such popular type of investment.

The fixed deposit facility of HNB Finance allows you to earn comparatively higher, which is just one of several benefits you can experience, when compared to other financial institutions in Sri Lanka. Before understanding the other major benefits, let us first understand how an FD works.

How do Fixed Deposits Work?

Simply put, FDs are investments that guarantee a fixed return after a certain period of time or ‘term’ (agreed by the individual and the financial institution beforehand). This return comes with an interest, which is calculated based on the period of the investment.

Due to the sure return, a fixed deposit is a safer investment option to earn higher income.

Benefits of Opening Fixed Deposits

Choosing to invest in a fixed deposit with HNB Finance allows you to experience several benefits. Here are some of the key advantages:

Higher Interest Rates
Naturally, a fixed deposit comes with higher interest rates that give you favourable returns. However, HNB Finance’s interest rates are recognised to be one of the best on the island, which can be earned monthly, annually, or on maturity. Moreover, if you are a senior citizen, you are eligible for an additional 0.5% interest on your investment. In short, your returns are sure to be higher than any other financial institution in Sri Lanka.

Insurance
Fixed deposits come with insurance to make sure the individual (investor) is guaranteed his/her return. Your deposit is insured by the Sri Lanka Deposit Insurance Scheme of up to LKR 600,000 per depositor. Furthermore, HNB Finance possesses a National Long-Term Rating at ‘AA- (lka)’, awarded by Fitch Ratings, which is an indicator for secured FDs.

Low Risk
Due to the secured nature of a fixed deposit, your earnings until the end of the term will not be influenced by external forces such as stock markets. This is because a fixed deposit comes with insurance and a guarantee of a fixed interest rate. In short, an FD has a low risk of an unfavourable return.

Encourages the Habit of Saving and Budgeting
Whether you may realise it or not, FDs act as an incentive to save your hard-earned money. Due to its liquidity and low risk, the FD acts as a lender of last resort. In other words, if you were to be in a situation that requires you to come up with a significant amount of money, your fixed deposit can be broken prematurely by withdrawing it. Of course, you will have to pay penalties and other charges, however, it is negligible. In short, it encourages the habit of saving.

Flexible Term Criteria
Fixed deposits can be made with flexible ‘terms’ to suit your liking. Whether it is 12 months to 60 months, your fixed deposits with HNB Finance can be timed as such, so that your earnings can be received when you need it most. FDs are flexible in their investment periods, unlike other investment options.

Loans Against Deposits
This is unique to HNB Finance, as you have the opportunity to obtain loans against the deposits you have made. Loans of up to 90% of the deposit can be obtained with a minimal interest rate.

In short, a fixed deposit, especially made with HNB Finance guarantees not only higher earnings, but also security, flexibility, and access to useful loan facilities without experiencing any major risk.