The Big Difference Between Loans and Bonds You Need to Know!
Loans and bonds are popular methods of financing purchases, but it's important to understand their key differences. Both loans and bonds involve borrowing money, but the lenders and repayment terms differ. Here are the major distinctions: Loans Loans are typically provided by banks or financial institutions. Borrowers agree to repay the loan with interest over a set period. Loans are often secured by assets like homes or cars, allowing lenders to take possession of these assets if the borrower fails to repay. Bonds Bonds are issued by organizations such as companies or governments. The bond issuer pays interest to bondholders over a designated period and repays the principal at maturity. Bonds do not require collateral; instead, they rely on the issuer's ability to make payments. Commonly Taken-Out Bonds • Trustee Bond : A trustee bond issued by corporate trustees, guaranteeing that they will fulfill their duties when administering an estate or trust. • ...