Finance glossary
Corporate Bond
In simple terms
A corporate bond is a loan you make to a company. It pays you regular interest and aims to return your money on a set date — usually paying more than a government bond because the risk is higher.
On this page
What does corporate bond mean?
A corporate bond is issued by a company that wants to borrow money. You lend to the company in return for fixed interest payments and repayment of the face value at maturity.
Because a company is more likely to run into trouble than the UK government, corporate bonds usually pay a higher rate than gilts to compensate for the extra risk.
How corporate bonds work
Bonds are rated for credit quality: “investment grade” bonds are seen as safer, while “high yield” (or “junk”) bonds pay more but carry a higher chance the company cannot repay.
Like all bonds, their market price moves with interest rates and with the market’s view of the issuer’s financial health.
How could this affect me?
Corporate bonds can offer more income than gilts or savings, but if the company defaults you could lose interest or capital. Spreading across many bonds — often via a bond fund — reduces the impact of any single failure.
The extra yield is a reward for taking extra risk, not free money.
Things to watch out for
- A higher yield means higher risk — the company could default.
- “High yield” or “junk” bonds are considerably riskier than investment-grade ones.
- Bond prices fall when interest rates rise, even if the company is healthy.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- MoneyHelper, Bonds and gilts explained (opens in a new tab). Accessed 22 Aug 2026.