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5 Reasons Not to Withdraw your Fixed Deposits Prematurely

When it comes to investment or saving money in a financial instrument that will give fixed returns, people rely on a fixed deposit scheme of a bank or a private lender.

However, some situations in life demand an immediate flow of money. During such a time, FDs are one of the investments that people tend to break first.

As a result, investors lose out on the FD interest rates, but they also suffer a penalty on the total maturity figure. Hence, unless it’s very urgent and you don’t have any other alternative of money, you should ensure not to withdraw your FDs prematurely.

  1. Penalties-Premature FD withdrawal invites a penalty from a bank or a lender for withdrawing your fixed deposits before maturity. Thus, be double sure while you decide to withdraw the FD amount.
  2. Loss of FD interest rate benefits-When you opt for a premature closure of the FD account, you are also bound not to gain FD interest rate profits which you would have earned if withdrawn on maturity. Thus, not availing the interest may lead to a financial loss. You had invested in an FD investment to earn fixed deposit interest rate profits, and when you see that you won’t be getting it owing to premature withdrawal, the whole purpose of your investment go waste.
  3. Hindrance to growth prospects-You should know that every fixed deposit multiplies over some time. The concept is quite simple to understand – the longer your tenor is, the more value gets added to your fixed deposit. Once the initial investment grows, it could be used for asset purchase or holidays purpose. Thus, when you opt for a premature closure of your FD investment, you hinder the growth. Why? You get nothing else other than the amount that you have invested. What’s more, you are also bound to lose out on your maturity of the FD amount.
  4. Financial insecurity-Suppose if you are a retired individual and have invested in an FD investment for higher profits and if you opt for a premature withdrawal, you would not get an income source. As a result, it may lead to worries such as managing the rising expenses and paying bills. Thus, if you have an urgent need for money, you can always avail a loan against your FD and keep your investment intact.
  5. Compliance with legalities-Just like other transaction procedures, the premature withdrawal of your FD also has a long list of formalities to manage. You may have to fill many forms and submit many documents. Once you are through with the cumbersome procedure, then only a bank or lender may proceed with the formalities to provide you your money.
The Bottom Line
You just saw how a premature withdrawal of your FD could hurt your profit output and beyond. Thus, take a proper stock of the situation before withdrawing your FD.
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