• A sinking fund is an account that contains money set aside to pay off a debt or bond.
  • Sinking funds can help pay off debt at maturity or help buy back bonds on the open market.
  • Callable sinking fund bonds can be called early, which will remove future interest payments from the investor.
  • Early repayment of debt through a sinking fund saves the company’s interest costs and prevents the company from financial difficulties in the future.