Types Of Debt
Posted on February 14, 2008
Filed Under Mortgage
Debt can be of various types, which also include basic loan, syndicate loan, bonds and promissory notes. Debts which involves large sums of money can be secured through mortgage or security interest over the debtor’s property and the creditor will have the option to exercise right over the property, in case the debtor fails to meet his obligation with regard to repayment of the debt. Basic loan is the simplest form of debt. It involves lending a principal amount for a fixed period of time and the interest over the principal amount is calculated as a percentage annually to be paid also by the date fixed. In some cases, the amount actually loaned to the debtor is less than the principal sum to be repaid; the balance principal amount is adjusted against the interest to be accrued during the period of the loan sanctioned.
A syndicate loan is a big time loan that are sought by companies and the amount is so big that a single lender may not be prepared to undertake the risk of such amount in a single loan. A syndicate of banks may form a conglomerate and each agree to put forward a portion of the principal amount.
Bond is a debt security issued by some companies and government. Bonds have a fixed lifetime and at the end of lifetime, the holder becomes eligible to get the principal sum along with the interests.
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