You never know when an emergency can knock at your door. It is best to be prepared for an emergency. Now health emergencies can be particularly difficult to handle. This might involve the risk of life too. Finance can be a major obstacle when such health issues arrive.
Medical fees are expensive these days and also the surgeries, operations including its medication can make one’s pockets empty. Also, raising money in a short period of time can get difficult if an accident takes place. Thus it’s very necessary to save prior before such an emergency arrives.
To avoid such risk in future you can start saving money today. When it comes to savings, banks fixed deposits work the best. Bank fixed deposits are the easiest way and a commonly preferred way to save some deposit. Fixed deposits are measured as a safer option as opposed to the stock market and mutual funds.
Most people often tend to liquidate their fixed deposits which can sometimes be a drawback. Liquidating your FD before its maturity can lead you to get a lower rate of interest. The rate of interest on your fixed deposit may not be same once you try reinvesting again in the FD.
Let’s suppose that you have invested in a fixed deposit for 3 years, one year ago. You might have incurred an interest rate which ranges between 9.5-10%. However, if you are looking to invest your money in a fixed deposit today you will only get an interest rate of 8.25-8.75%.
To avoid this you can go for a short-term loan offered by the banks against your fixed deposit. By doing this you will have a constant rate of interest. This makes no change in the interest on your FD account given by the bank as it is agreed by the bank.
You are allowed to overdraft 90 percent of the fixed deposit by the bank. But, here you need to pay interest above 100 basis points.
For example, you have an FD of RS.1 lakh for a period of 3 years having an interest rate of about 9% and you have written a cheque of RS.10,000 for a period of 10 days. You need to repay the amount on the 10th day along with the interest. And this will not affect your interest rate on your fixed deposit account in future.
Now such an overdraft can be used to pay off your medical bills in case of emergency. If you have an investment in FD which is about to get matured within 15 days from now. And you wish to invest in Non-Convertible Debenture (NCD) which offers 11 percent of interest rate. To invest in NCD you need some fund.
Then you can use the overdraft facility and pay the bank in the span of 15 days. This might sound to you like an exciting idea but you must be careful while drawing a cheque. In case you lose your money the fixed deposit too is lost. In case you are unable to repay the overdraft amount you might be required to pay a penalty. Fixed deposit can definitely save you financially during a medical emergency.