Fixed term interest rate
The interest rate in the fixed term is what we know as profitability, the percentage of the deposited capital that a saver will obtain as a benefit for the time that his money will remain in a financial institution.
The fixed terms is one of the modalities that more followers have in our country due above all to its security, but … what is its interest rate? How do they pay? Are there better options? We tell you in this article.
Interest rates on fixed terms
Interest rates on fixed terms are no longer as attractive as they were before they were around 4-5% annually. Right now in Spain, most of the fixed terms are at an interest rate close to 0%, almost without offering profits to investors. It should also be borne in mind that this type of products also establishes a penalty for early cancellation, which would further reduce profits. Therefore it is important to determine the term of your investment well.
The fixed term interest rate will be determined by the term and the risk of the operation. We tell you the reasons for this drop in the rates in the fixed terms.
Lowered interest rates on fixed terms
At present, the interest rates received for contracting a fixed-term deposit are very low, around 1%, reaching 2% in the best case and in most of them very close to 0% per year.
This drop in interest rates is mainly due to three fundamental reasons:
- In January 2013, the Bank of Spain banned extra types, which means that financial institutions cannot offer deposits at an interest rate greater than 3%; This obligation is based on the war that was taking place between the different banks to capture money from savers.
- The European Central Bank has lowered interest rates to a record low, with the intention of avoiding deflation (general price drop) in the eurozone.
- The injection of liquidity by Europe into Spanish financial institutions, which means that they no longer need so much financing from savers.
Alternatives to obtain a better interest rate
One of the alternatives for fixed-term investment is the guaranteed investments of Wisemen Credits. Through this product the investor lends his money directly to companies previously analyzed and that have the endorsement of a Reciprocal Guarantee Company that, in case of late payment of the company (3 unpaid installments), the SGR returns to investors invested capital and ordinary interests. This is the safest investment in Crowdlending.
Advantages of the Wisemen Credits alternative
- Minimum investment of € 50
- Guaranteed annual profitability of 2% + Euribor
- Recovery of capital and interest month by month
- Total investment term 3-5 years
- Insurance for an SGR
Taxation of the interest rate of a fixed term
The interest rates of the fixed terms must be paid to the Treasury, an amount that the bank deducts before delivering the return on the deposit to the client.
But in taxation, the interest rate for a fixed term is not the same for everyone, differentiating between people residing in Spain and residents abroad.
Residents in Spain
It must be taxed at the fixed term interest rates through three taxes:
- Income Tax for Individuals (Personal Income Tax) : Fixed-term interest rates are taxed as capital returns at a fixed rate of 21%, regardless of the amount of interest generated.
- Wealth Tax : They must be declared in this tax every year, only in cases where the person who hires the deposit has the obligation.
- Inheritance tax : In the event of the death of the holder of the deposit, without it having reached its expiration date, the balance in the deposit must be declared.
Non-residents in Spain
Deposits contracted by people who do not have their residence in Spain should not be taxed on the interest generated, since these deposits are exempt, as long as it is proved that the residence is abroad.