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Is it Feasible for Opting Auto-renewal Option for FD?

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Fixed deposits are an excellent way to ensure guaranteed growth in the value of your investment. Considering its low-risk nature, it is essential to have fixed deposits (FD) as a part of your portfolio. FD eligibility is relaxed when compared to other forms of investment. A novice investor can get guaranteed returns for their investment without having to assume much risk whereas an experienced investor can achieve a hedge with a fixed deposit among their other high-risk securities.

Among the top tips to manage a fixed deposit is splitting up the amount allocated for FD investment into smaller amounts for different tenures. This way, you no longer need to worry about the long term as well as short term liquidity needs. You can have a definite amount at maturity for both the near future as well as in the long run. But when you need to manage different fixed deposits with varying tenures, it can become difficult to keep a track of its renewal dates. One such option offered by banks and non-banking finance companies (NBFCs) is the auto-renewal option. Let’s understand it in detail.

What is the auto-renewal option in FDs?

An auto-renewal facility is one where the matured fixed deposit investment is automatically renewed for another period by the financial institution. This feature can help to avoid loss of interest that would be otherwise caused due to delayed renewal. Also, in some instances, the money is paid out to the savings account and there is less interest earned on such amount for the remaining tenure until renewed or reinvested elsewhere.

The terms of auto-renewal service vary across financial institutions. Some financial institutions may renew the fixed deposit for a period of one year whereas others may renew it for the exact same duration of its original investment. Further, the auto-renewal option saves you the hassle of visiting the branch. If you have opened a fixed deposit online, this auto-renewal feature reduces the lag to reinvest into a new FD at the end of the tenure. Another benefit of using the auto-renewal option is getting an optimal fixed deposit interest rate on the renewal date. This way, you can earn without having to lose out on any interest for the said FD. This facility of auto-renewal is available with leading banks and NDFCs including Mahindra Finance. You can make use of it for seamless renewal without having to worry about any loss of interest.

For some depositors, this same feature may not be helpful and instead prefer an investment-management tool. With this, they can have complete control over the investment including its tenure as well as switching to a different investment avenue.

Thus, it is beneficial to opt for a provider that renews your FD automatically. You need not be worried about keeping a track of its renewal date and this feature benefits you in the long run.

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