How To Calculate The Fixed Deposit Monthly Interest ?

Updated on: 4 Dec 2024

Using the fixed deposit monthly interest payout ensures financial stability and constant cash flow. Non-cumulative FDs allow you to reap these benefits. With periodic access to gains, you can get a second source of income while employed or during retirement.

Read on to know what a monthly interest payout fixed deposit is, the rates of reputed banks, its perks and how to choose one.

What is a Non-cumulative FD?

To book an FD, you need to make a lump sum deposit and choose your preferred tenure and payout option. Once the tenure ends, you get the total deposit amount back. If you choose to get the payout every month instead of at the end of the tenure, non-cumulative FDs are the best option.

Most financial companies allow you to choose an FD with a monthly payout along with quarterly, bi-annual or annual payouts. Depending on your financial requirements, you can choose the required frequency.

How To Calculate Monthly Payouts

To calculate your monthly interest, banks use this formula:

P(1+R/N)^N*T

Here, P stands for the initial invested amount, R is the FD monthly interest rate, T is the total chosen tenure, and N is the frequency of the payout. For monthly payout, the frequency will be 12. With this formula, you will get the total interest earned on the deposit. After dividing the amount by 12, you will get the monthly earnings.

However, keep in mind that the rates for monthly payouts are different in comparison to those for annual payouts or those applied to cumulative deposits. The best way to proceed is to use the FD interest calculator on the issuer’s website or mobile app. For instance, say you plan to invest ₹1,00,000.

FD Monthly Interest Rate	Tenure (in months)	Monthly Interest Earnings (in ₹)	Total Interest Earnings (in ₹)
6.70%	12	555	6,663
7.25%	18	601	9,028

Disclaimer: These results have been generated using an online FD calculator and are for illustrative purposes only.

As you can see, the rate for monthly interest for 12 months is 6.70% and the rate of investing for 18 months is higher at 7.25%. Based on this, you can see your monthly earnings and compare them to take the right call. An FD calculator is digital and offers instant and accurate results that help you decide better.

By choosing the senior citizen tab on the FD calculator, you can also check if the monthly FD interest for seniors is higher. Taking the same example as above of investing ₹1,00,000 in an FD with monthly payouts, check out what you may earn:

FD Monthly Interest Rate	Tenure (in months)	Monthly Interest Earnings (in ₹)	Total Interest Earnings (in ₹)
7.20%	12	596	7,157
7.75%	18	642	11,550

Disclaimer: These results have been generated using an online FD calculator and are for illustrative purposes only.

As you can see, you can increase your monthly gains by investing for a longer time frame. Use this calculator to forecast your gains before you finalise your investment.

Also Read: Short Term FD vs Long Term FD

Advantages of Monthly FD Payout

When you choose an FD with a monthly payout, you get access to your returns every month. Considering that, here are some benefits you can enjoy:

Additional Funds

With non-cumulative FDs, you get an extra source of income. Since the FD interest rate is better than the rate offered by a savings account, you can earn well and put your surplus funds to good use.

Cash Flow Flexibility

The monthly FD interest you earn can increase your purchasing power, giving you better cash flow. This is an ideal option to get passive income and elevate your lifestyle.

Reinvestment

With the monthly interest, you can start a new investment. If you have a loan, you can also use this money to pay your EMIs.

Retirement Financing

With a lump sum deposit, you secure your golden years by using it to finance your daily living and medical expenses.

Predictable Income Source

With this type of FD, you get a fixed monthly return. Thus, you can easily manage your budget to meet fixed obligations. This way, you are not dependent on your savings or job and reduce the risk of premature withdrawal.

FAQs on Fixed Deposit Monthly Interest

Is there a minimum deposit amount required to receive monthly interest payouts?

Yes, most banks have a minimum investment amount whether you want to book a fixed deposit with monthly interest payout or receive the gains at maturity.

Is the monthly interest guaranteed regardless of changes in interest rates?

Yes, the monthly FD plan gives you a fixed income throughout the chosen tenure. During this time, your interest rate remains the same as FD rates are not linked to the market.

Can I change my payout frequency from monthly to yearly after the FD is opened?

Some banks allow you to switch from monthly payout to other options. However, it is important that you clarify this before making the deposit or by reading the terms and conditions.