When you go for the investment of your money in fixed deposit then the banking or non-banking institutes gives you a contract for signing and in return, they pay you an interest rate as decided. The contract is all about the time period and the specific amount you will keep for a specific time period.
But if you terminate your contract then it is called premature fixed deposit withdrawal.
There are many platforms that provide online platforms for the withdrawal of your premature fixed deposit. But if you do this then you are also attracting some penalty which you have to face according to the contract you signed.
Penalties: There is huge flexibility for the withdrawal of the money before its term ends. But some banks also charge some penalty which is in the range of 0.5% to 1% of your interest rate. So, the FD interest rate you are getting in the initial will slightly be less because you are withdrawing your money before time.
Let us understand this with an example if you have invested your money for 5 years at 9% of interest rate but you withdraw your money after 2 years so you will get 7% interest rate because when you opened you FD the interest rate amount was 7% and on revise pay you will get 6% of interest rate as 1% penalty by the bank. So, this is the penalty which you have to face.
FD cannot be withdrawn prematurely: Tax Saver Fixed Deposit, this has a lock period of 5 years.
Some banks have a condition of not withdrawing money six months, if they do the same you will get zero FD interest rate.
But apart from these penalties, according to me, a fixed deposit is one of the best ways of investment. I recommend you to invest your money in Fixed Deposit.
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