Long-term vs short-term FD: Where should you invest?

Long-term vs short-term FD: Where should you invest?

Fixed deposits (FDs) are a guaranteed way of earning huge interest on your savings and making it grow. FDs are safer compared to money market instruments like mutual funds, stocks, shares, and others.

Opting for an FD is also simple and involves minimal hassle. You can open an FD account with a reliable financial institution in this country.

The primary reason for the popularity of fixed deposits is their flexible investment tenors. FDs offer both short-term and long-term tenors to customers. However, these lock-in periods also tend to confuse people as to which one to opt for. So, here is a comprehensive guide to long-term and short-term FDs, and which one you should invest in.

What is a short-term FD?

A short-term fixed deposit is generally one that comes with a lock-in period of up to 12 months. Such an FD can have a minimum tenor of 7 days.

What is a long-term FD?

A long-term fixed deposit usually comes with a tenor of 12 months or more. The lock-in periods of these FDs can go up to 60 months or even more.

Which one to go for?


A short-term FD is more profitable than a savings account. FDs come with annual interest rates that can go up to 8.75%. On the other hand, savings account earns you a yearly rate of interest of only 4% (2% half-yearly).

Hence, availing a short-term fixed deposit brings you more returns than a savings account. Plus, you also receive the principal at the end of the year (at maximum).

However, a short-term is not as lucrative as a long-term investment. You get the power of compounding when you opt for a long-term FD – you earn interest on the interest you have earned.

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Long-term fixed deposits are exceptional when there is a fixed obligation in the future; for example, a wedding. In such cases, you can invest a lump sum amount for a prolonged period. Upon maturity, your investment brings you high returns that can help you meet the big expenses without any difficulties.

Here, the funds that you invest remain lock-in for that long period. You can withdraw the investment before the maturity date though, but it will attract a premature withdrawal fee.

So, the fixed deposit scheme you go for should solely depend on your investment strategy and requirements. Usually, it is healthy to keep a mix of short-term and long-term FDs. An online fixed deposit calculator can help you decide how much funds to invest and for what period.

Various NBFCs offer fixed deposits. Bajaj Finserv provides with Fixed Deposit, rated MAAA by ICRA and FAAA by CRISIL. The FDs are stable and deliver you guaranteed returns.

Bajaj Finserv provides with 0.35% higher rate of interest to senior citizens. Those renewing their account, Bajaj Group employees, and existing loan customers of Bajaj Finserv can avail 0.25% higher interest rate than the standard rate.

You can easily apply for a fixed deposit online by providing only a few details about you and the investment amount.

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