As a general rule, the longer you put your money away for, the higher the interest rate you’re offered will be.
This is, of course, a risk balancing exercise: if interest rates go up during the term, you’ll lose out, but if they go down, you’ll be safe.
Interest will either be paid monthly, annually, or the whole lot will be paid on maturity. Interest will be paid into a separate account but, in some cases, it can be reinvested into the bond, meaning that the actual value of subsequent payments will increase a little bit each year.
If you invest £10,000 in a 3-year bond with an interest rate of 2% that pays on maturity, then at the end of the three years, you’ll receive £10,600.
But if you’re given the option to reinvest your interest, then with the same account you’d get £10,612.08 - not a huge amount more, but it can add up if you’re investing large amounts or leaving the bond locked up for longer.