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Fixed Rate Bonds vs. ISA's (Page 1 of 2)
It is difficult to know where to put your money these days to get the best returns, especially with the way the economy has suffered over recent months, pushing the Bank of England to make a string of cuts to its Base rate which have in turn been passed on to savers rates.
With the Base rate now down to the lowest level ever recorded, rates on normal savings accounts have been slashed, which has limited our saving options.
The two obvious choices in today’s savings market are Fixed Term Bonds, and Individual Savings Accounts (ISA). Although both types of savings accounts have their similarities, there are several advantages and disadvantages to each and it is this topic of discussion that this article will be focussing on.
Fixed Term Bonds
Fixed Term Bonds provide a rate that is fixed throughout the duration of the bond, giving savers a predictable income with no surprises. Once you have chosen a fixed term account, you are able to calculate exactly how much interest you will earn, minus the tax, to give you your end balance.
Most Fixed Term Bonds offer very high deposit limits, generally between £500,000 to £2 million, but some, such as ICICI, will let you invest as much as you like. You must deposit the full amount upon opening the account and cannot add to this once active.
There are no limits to how many fixed term bond accounts you can open within any one year, so unlike ISA accounts, if you decide to close your account for any reason, you can still invest any amount elsewhere at any time.
Fixed Term Bonds generally offer the highest saving rates available, but these tend to be on shorter-term bonds, as they carry less risk to significant rate cuts leading to banks and building societies paying you over the odds in interest for long periods of time.
‘What goes up must come down’
If you are extremely lucky and do your research, you could open a fixed term bond before rates significantly fall, allowing you to earn well above savings rates offered to new and variable rate customers. If you cast your mind back to October last year, when the Base rate stood at 5%, you would be very happy with yourself if you were earning this kind of rate on your savings today, with the Base rate now at 0.5%.
A big element to a fixed term bond account is the “fixed term”. You must be realistic with your finances and only go for this option if you can afford to lock your money away for some time. If you find that you need to withdraw any amount from your account, the bond will close and in most cases you will lose any interest to accumulated to date.
As well as the possibility of rates falling during the life of your bond, you could see the opposite effect, with rates significantly rising, leaving you locked in at a low rate. It is always a good idea to look at recent trends in Base rate changes to enable you to make an educated prediction on the direction it’s headed. Many economists believe that rates will continue to fall during 2009, going as low as 0%.
Understanding debt factoring and its complexities
When many people hear debt factoring, numerous normally wonder what it’s. It’s usually declared having the concept of something might be of help on how to use it and also this must include being aware of what debt factoring is. This technique can easily be termed as a means whereby established companies usually sells their accounts at cut-rate price to your 3rd party. Those firms that have the accounts are typically called ‘factor’ and so the name debt factoring. After the ‘factor’ has obtained the accounts, they usually collect the business debts by way of a procedure called factoring. This procedure is generally employed by companies to help them improve their cash flow this also occurs as they get cash for your account receivables which might be purchased therefore receiving money immediately because of this transaction.
Debt factoring consequently becomes the strategies which many organisations have the ability to inject much more income for additional operations. This might be beneficial to those companies that are already transacting on credit and therefore are incapable of settle their dues owed with their creditors. Nevertheless, the business should be stable and of a strong reputation to utilize this method for raising much more funds. Numerous retailers and traders normally prefer the use of receivable factoring.
When businesses sell goods to financial firms, banks or perhaps private companies, the business’s credit available in the market is scrutinized which will make some important considerations. Debt factoring necessitates that allowing out your invoices to ‘factors’ that then become to blame for commercial collection agency. Your factors determine your profits after you have created the receivable factoring deal ones the repayments could come in in a day possibly even. Which means you need to consult the ‘factors’ prior to disposing or selling your goods.
It’ll be essential to understand the term and conditions involved simply uses enter into a debt factoring agreement. The reason being the receivable factoring generally is a lasting process. It is going to therefore to get a clear picture of once your debt factoring will be more than so that you can be capable of either negotiate the notice period or look out for one more altogether.
Debt factoring is obviously very complex because it involves things such as the reviewing of your respective financial status and evaluation of your suitability for factoring through the financial institute or bank that you would like to use. Sometimes credit limits might be required you’ll also find to agree where did they are going to work.
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