Cash Bonds
With the Bank of England base rate resting at a low level, many savers may be wondering which savings and investments can provide them with the most lucrative return, or if investing in new products is even worth it at all. Cash bonds, also known simply as bonds, still offer an advantageous alternative to boost your existing savings.
A cash bond is a loan to a big organisation, company or even the government (gilts). In this sense the individual purchasing the bond becomes the lender to the borrower. Cash bonds usually run for a set period of time known as the term. The holder is rewarded through interest payments which will be made at monthly or yearly intervals until the end of the contracted term when the loan is repaid.
Cash Bonds - The Key Facts
- The length of time (term) you are contracted into a cash bond will clearly be stated in the terms and conditions of your account and can range anywhere between 6 months to 10 years.
- A cash bond must run for the length of its contracted term and cannot be cashed in before hand.
- You may not be able to deposit or withdraw money from your cash bond.
- Usually, the larger lump sum you can deposit and the longer term, the better your interest rates you will be offered.
There are various cash bonds on the market including:
Fixed term cash bonds: The most common type of bond which requires a one off lump some deposited for a fixed amount of time. Most cash bonds will fall under this category.
Fixed rate cash bonds: Will guarantee to pay a fixed rate of interest for the term of your chosen cash bond. You can rest safe in the knowledge that you'll be earning a guaranteed fixed interest rate should the Bank of England base rate drop.
Tracker cash bonds: The interest rate you will receive will track any changes to the Bank of England Base Rate.
Government gilts: Cash bonds or loans to the government.
Corporate cash bonds: Loans to companies.
There are numerous cash bonds on the market and deciding on the best one for you will depend on your financial circumstances. An independent savings advisor can work with you to help find the best cash bonds with the most competitive interest rates. Fill out our online form today for a free no obligation consultation from an IFA.
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