Systematic Deposit Plan is a savings tool wherein, individuals can save a substantial amount of money even with a minimum deposit amount. Such a plan is mostly deemed suitable for those individuals who are relatively new when it comes to financial planning.
Since such plans come with a flexible maturity period as low as a year, it is a viable savings option for both long-term and short-term. In fact, individuals who intend to save extensively in a year may want to check out the best SDP plans for a year. They should learn about the offerings and requirements before applying for a savings plan they find the most suitable.
Steps to invest in a Systematic Deposit Plan
Most leading NBFCs that extend such a savings plan allow individuals to apply for it online or offline. For instance, by following these steps, individuals can apply for a competent Systematic Deposit Plan for a year online –
Step 1 – Visit the official website of an NBFC.
Step 2 – Look for ‘Systematic Deposit Plan’ to apply.
Step 3 – Provide essential personal details like name, contact details, email and address.
Step 4 – Enter vital detail like monthly deposit, number of deposit and tenor (in months).
Step 5 – Print the application form and attach the required documents.
Step 6 – Submit them to the representative of the financial institution to complete the process.
Applicants would be required to submit essential documents to complete the application process.
Here’s a list of the same –
- PAN card.
- Account payee cheque.
- NACH mandate.
- Latest passport-size photographs.
- Any one of these – Aadhaar card, Voter ID, driving license, passport, etc.
Few points to consider
Applicants should make sure to check these before applying for one of the best SDP plans for 1 year –
- Minimum deposit
Being a monthly savings plan, it is vital to opt for a plan that requires them to deposit a manageable amount of money each month.
For instance, the Systematic Deposit Plan of Bajaj Finance requires individuals to deposit a minimum of Rs.5,000 each month. This helps individuals with limited income and those planning their retirement to build reliable savings with minimum effort.
- Terms against loan facility
Though most financial institutions allow individuals to avail a loan against their deposit, they require deposit holders to fulfil certain requirements.
Make sure to opt for a deposit plan that comes with a simple process to avail the loan facility. Subsequently, you should find out the terms and conditions set against it to streamline the process better.
- Terms against premature withdrawal
Deposit plans often prove an effective means to cushion unwarranted emergencies. This makes it a necessity to find out if the savings plan allows premature withdrawal or not.
For instance, certain Systematic Deposit Plans enable individuals to prematurely withdraw from more than one deposit which is over 3 months old. However, such withdrawals are subjected to the norms and regulations of the RBI.
- Associated charges and penalty
Applicants should find out if there are any charges associated with the Systematic Deposit Plan. Generally, the best SDP plans for 1 year do not levy any penalty on missing out the scheduled date of deposit. It allows individuals to save more without being worried about unwanted charges.
Systematic deposit plan vs regular FDs
Though both fixed deposit and systematic deposit plan are potent tools for regular savings, the former is more effective than the other.
The following are the reasons why a Systematic Deposit Plan is better than a regular FD –
- Small deposits: Unlike regular fixed deposits, individuals can deposit a minimum of Rs.5,000 each month into a Systematic Deposit Plan. This not only helps mobilise small savings but also builds a robust fund eventually.
- Habit of saving: Since the savings plan requires applicants to deposit money monthly, it helps develop the habit of regular savings. In turn, it aids individuals to work on their money-management skills as well to encourage more savings. Conversely, with regular FDs, the scope of developing such a habit is low as it follows the lump sum approach of deposit.
- Different interest rate for different deposits: In case of a regular FD, the rate of interest paid remains fixed throughout the tenor. Conversely, for Systematic Deposit Plan, the deposits accrue income at different rate of interest each month. It is mostly because each monthly deposit is treated as a separate entity in this case.
Investors can use an SDP calculator to simplify the interest calculation and find their returns.
- Opportunity to earn more: Since the rate at which fixed deposits accrue interest is fixed, the flow of return is somewhat stagnant. Contrarily, in case of a Systematic Deposit Plan, individuals may earn higher returns on their deposit when the prevailing rate of interest is relatively high.
Hence, by filling the application form online and submitting the required documents, youngsters can apply for the best SDP plans for a year. They should also consider a few things like associated terms and conditions of such a savings plan to maximise its benefits.