Loans. A loan entails the redistribution of financial assets over time,
between the ' and the '. The borrower initially receives an amount of
money from the lender, which they pay back, usually but not always
in regular installments, to the lender. This service is generally provided
at a cost, referred to as interest on the debt.
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Bonds. These are debts issued by companies or governments who guarantee payment of the original investment plus interest by a specified future date. Bonds are tradable instruments (debt securities) which are issued by a borrower to raise capital. They pay either fixed or floating interest, known as the coupon. As interest rates fall, bond prices rise and vice versa.
An investment that pays you interest in semi- annual installments until a future maturity date, when the issuing government or company repays the bond s face value. Strictly speaking, the issuer pledges assets as security, except in the case of government bonds, but the term is often loosely used to describe any debt investment. Corporations and the federal, provincial and municipal governments issue bonds.
The two most common types are:
Surety Bond: A three party agreement whereby one party (the Surety), is bound with the person/organization bonded (the Principal), to a third party (the Obligee or Beneficiary). The Surety Bond ensures that the Principal will comply with the terms of the contract existing between the Principal and the Obligee.
Fidelity Bond: An insurance policy that reimburses an employer for employee theft or embezzlement.
Mortgages. Technically the term mortgage refers to the legal device used in securing the property, but it is also commonly used to refer to the debt secured by the mortgage. It is a mortgage is a method of using property as security for the payment of a debt. In most jurisdictions mortgages are strongly associated with loans secured on real estate rather than other property, and in some cases only land may be mortgaged.
It is usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.
A mortgage may also refer to a document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off the loan.
Arranging a mortgage is seen as the standard method by which individuals or businesses can purchase residential or commercial real estate without the need to pay the full value immediately.
Promissory notes. Legally binding contract between a lender and a borrower; the promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.
By signing this note the borrower promises to repay the loan, with interest, in specified installments. The promissory note includes information about the grace period, deferment or cancellation provisions, and the student's rights and responsibilities with respect to the loan. It's very important to read and save this document because the borrower will need to refer to it later when beginning repayment of the loan.