Debt Instrument

AAA

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.

RELATED TERMS
  1. Nonpar Item

    A check, draft or negotiable instrument that a paying bank honors ...
  2. Debt

    An amount of money borrowed by one party from another. Many corporations/individuals ...
  3. Interest

    1. The charge for the privilege of borrowing money, typically ...
  4. Loan

    The act of giving money, property or other material goods to ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Note

    A financial security that generally has a longer term than a ...
Related Articles
  1.  Here we take a look at how you can evaluate whether the debt will affect your investment.
    Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  2. Bonds & Fixed Income

    5 Basic Things To Know About Bonds

    Learn these basic terms to breakdown this seemingly complex investment area.
  3. Options & Futures

    Principal-Protected Notes: Hedge Funds For Everyday Investors

    PPNs guarantee to return at least 100% of the original investment and have the potential to return much more.
  4. Options & Futures

    Common Bond-Buying Mistakes

    Avoid these errors made daily in bond portfolios everywhere.
  5. Credit & Loans

    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 become very imaginative in the creation and marketing of consumer debt ...
  6. Investing

    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 debt and to raise the cash needed to run the federal government. When ...
  7. Investing

    What do people mean when they say debt is a relatively cheaper form of finance than equity?

    In this case, the "cost" being referred to is the measurable cost of obtaining capital. With debt, this is the interest expense a company pays on its debt. With equity, the cost of capital refers ...
  8. Investing

    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 as more restrictive and expensive than selling debt on the open market ...
  9. Home & Auto

    Where are home values falling the fastest in the US, and why?

    Learn about the metropolitan areas in the United States experiencing the largest drops in median single family homes values in 2014 and the reasons behind it.
  10. FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.
    Credit & Loans

    Before You Choose An FHA Mortgage: 7 Key Points

    FHA mortgages offer flexibility and low down payments, though they're often pricier than traditional loans backed by private mortgage insurance.

You May Also Like

Hot Definitions
  1. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  2. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  3. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  4. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  5. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
  6. Annual Percentage Rate - APR

    The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents ...
Trading Center