Different Types of Debt
Generally speaking, various types of debt exist. Starting from basic loans to bonds, syndicated loans and promissory notes. Large sum of owning money might also be secured through mortgage or other type of security interest over some of debtor’s assets (property for example). In this case, a creditor has rights over the assets if the debtor is unable to repay the debt.
Different types of debt are:
- Let’s start with a basic loan. It is an agreement to lend a sum of money for a period of time and to be paid on negotiated date. Most of the loans, also require an interested to be paid on the same date.
- A syndicated loan consists most of the time with a large sum of money, granted to various companies and organizations. Furthermore, a group of banks work jointly together to provide this type of loan for a client.
- A bond is a secure loan, that is issued by companies or governments. Most of the time, bonds are issued to investors when corporation wishes to borrow certain sum of money. Bonds have different lifetime, and at the end of bond’s life the money should be paid in full.
- Finally, a promissory note, also known as note payable, is a contract between two companies for a debt to be paid on a later period.