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Posted September 7th, 2011 by Charles Purdy

What is a forward contract and how will it benefit you?

When you choose to use Smart Currency Exchange to move your money overseas, you will benefit in a number of ways. The first of these benefits will be the fact that there are many different contracts to choose from, depending on which best suits your monetary needs. There are contracts for moving money straight away, contracts for moving money in the future, and you can even order the trader to buy your currency if and when the exchange rate meets one which you are happy to pay for.

A forward contract is a bit like a pay now, buy later arrangement. This type of contract is perfect if you are working with a set budget, for example you need to put a deposit down on a property abroad. The deposit will cost you £25,000 at the current exchange rate, however if the rate changes, the same deposit could end up costing you £30,000. A forward contract means you can set the rate at the current one, and use it in the future. This means you can budget without the fear of the exchange rate moving and being left with a loss of £5000 or more.

The forward contract allows you to order your currency up to several months in advance, which is great if the rate hits a level that you just can’t resist. When you decide that you want to buy at a specific rate, you can either fix the amount of currency and the exact date that you want the money to be transacted, or you can choose to buy the currency by a specific date. This means that you will have until the agreed date to pay for the currency. In order to take out this second option, you will need to pay a very small deposit (usually around 5%-10% of the amount you are buying), within two days of agreeing to the contract. This deposit secures the good rate for you.

Smart Currency Exchange will be able to not only help you save money but also give you independent advice on the market at the time, and their traders do not work on commission which means they are working for the sole purpose of helping you – the kind of service you will not find in a high street bank.

If you haven’t yet collected your FREE report from Smart on "Why Overseas Property Buyers Lose Money… and how YOU can avoid it" get it here

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