Debt Instrument

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DEFINITION of 'Debt Instrument'

A paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Types of debt instruments include notes, bonds, certificates, mortgages, leases or other agreements between a lender and a borrower.

INVESTOPEDIA EXPLAINS 'Debt Instrument'

Debt instruments are a way for markets and participants to easily transfer the ownership of debt obligations from one party to another. Debt obligation transferability increases liquidity and gives creditors a means of trading debt obligations on the market. Without debt instruments acting as a means to facilitate trading, debt is an obligation from one party to another. When a debt instrument is used as a medium to facilitate debt trading, debt obligations can be moved from one party to another quickly and efficiently.

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RELATED FAQS
  1. What's the difference between bills, notes and bonds?

    Treasury bills (T-Bills), notes and bonds are marketable securities the U.S. government sells in order to pay off maturing ... Read Full Answer >>
  2. Why do companies issue debt and bonds? Can't they just borrow from the bank?

    Companies issue bonds to finance operations. Most companies can borrow from banks, but view direct borrowing from a bank ... Read Full Answer >>
  3. What do people mean when they say debt is a relatively cheaper form of finance than ...

    In this case, the "cost" being referred to is the measurable cost of obtaining capital. With debt, this is the interest expense ... Read Full Answer >>
  4. Are credit cards and debit cards considered debt instruments?

    Consumer debt instruments allow people to borrow money at specific interest rates. In recent years, the credit industry has ... Read Full Answer >>
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