Disposable income is the amount you have in hand to spend or save after deducting all mandatory expenses and taxes. You may desire to have a higher disposable income as it allows you to do the things you like. Investing is one of the most effective ways to boost your disposable income in the long run. Hence, consider actively investing.

Suppose you make an investment. However, you stop thinking that you need a lumpsum amount to invest. That is not the case. You can invest by regularly contributing an amount that is within your affordability by opting for a Recurring Deposit. You earn a competitive interest rate on your deposits, facilitating systematic wealth creation. When investing, you should be aware of the necessary details. Here are the different penalties associated with an RD:

• Missed payment penalty

As mentioned, you need to make regular deposits to the RD. You can choose the deposit amount and tenure. Suppose you decide to invest Rs. 4,000 every month for two years at an interest rate of 6%. The bank has set the 10th of every month as the investment date. You always make the investments on time. However, due to some reason you missed a month’s investment payment.

In that case, you need to pay a penalty. The missed payment penalty amount differs from one bank to another. It is generally between Rs. 100 to Rs.1,000. You need to pay this penalty upfront. Note that the penalty amount increases in the case of consecutive cases of missed payment. Contact the bank’s customer representative or check their website to know the missed payment penalty amount and associated terms.

• Premature account closure penalty

RD is a fixed investment option. You need to stay invested for the tenure you choose. You can make mid-term/ partial withdrawals from the investment. However, you can opt for a premature account closure, which means withdrawing from the investment before its maturity date. The bank lets you do so by charging a premature account closure penalty. Here again, the penalty amount varies for each bank. Generally, it is 1 to 2 % of the incurred interest.

There is no way you can avoid this penalty. Besides incurring the penalty, you should forfeit future interest earnings. This typically throws you off your long-term financial plan. Hence, think through before opting for a premature account closure. If you have a financial requirement, you can apply for a Loan against a Recurring Deposit.

Banks let you borrow up to 80-90% of the RD value as a Loan amount, which enables you to meet your financial requirements. You can get the Loan at a competitive interest rate for a flexible tenure, ensuring you do not feel burdened with its repayment.