Tag Archives: well
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%.
Debt management services a good idea for multiple loans
There are many times when a person does not have enough time or the patience to deal with the myriad of loans that every individual has on themselves. There are so many types of loans which every person takes to maintain that perfect standard of living. There are home loans which are the biggest debt in the financial portfolio of the individual. Also there are car loans, college and education loans. There are holiday loans and payday loans. There could also be personal loans as well involved in this case. There could homeowner or home improvement loans as well. The thing or main point here is that most individuals have more then 3 or 4 loans or types of debts on their heads. And managing them is not possible for every person in the market. It is tough work and needs a lot of organisational skills on the part of loan owner.
Thus for such individuals there is an interesting solution in the market. There are off course other choices but this one needs the least amount of work from the side of the loan owners. Thus it is a very popular choice as well. Debt Management Services have helped many people who were being crushed by the amount of time and meticulous planning it took to manage to pay all their debts on time. There have been many instances where a person lost much needed credit ratings even though they had the money to pay for their debts. The thing here is that some pretty good organisational skills are needed and not every one has them.
What a debt management program does is that they first collect all the information regarding the person’s debt. Next they compile, organize and categorize all this data. Now what the company does is provide suggestions and ask questions regarding the debt style of the individual. Also the company might talk with the banks and help in reducing the actual amount of debt or the interest rates as well. Also the company will bundle all the debts into a single debt for the individual. All the person has to do every month is pay a single installment and that will be used to pay of all the debts of the individual.
Thus this is much easier with all the stress of paying the funds on time o different banks on different loans passed on to the debt management services company. Also this can result in a lot of savings as well for the loan payers. Also the stress relief cannot be exactly valued either.