What is a secure bond?
bonds are a type of investment in which the money is lent to the debtor in exchange for a fixed return level. Many bonds are unjustified, which means there is nothing specific to back up the bond holder's investment, just the promise of bond issuer to pay the bond holder back. On the other hand, a secure bond is supported by assets, usually physical, such as real estate that are liquidated if the bond issuer cannot repay the borrowed funds.
While bonds are generally considered relatively safe investments, there is a certain degree of risk, as with any investment. The aim of secured bonds is to reduce this small risk even more, although there is no way to completely eliminate the risk. The secure bond is provided by a mortgage or other similar lien. If bond issuer, whether corporation, local administration or other entity, cannot repay the bond with interest, mortgage title or other asset at the end of the periodIt is converted to bond holders.
A secure bond is a somewhat incorrect name because it is not secured in the same way as a secure credit card, in other words with cash. If the bond is secured by a mortgage that is most common, there is no warranty that the mortgage itself will not be by default or that the basic property will still cost the value of the mortgage. In this case, the binding is not fully secured, but its risk is reduced in comparison with the fact that there were no pads.
All bonds pay interest rate as motivation to the investor to purchase a bond. Interest becomes the return of the investment of bond holder when the bond is returned. The more risky the loan is, the higher the interest rate it will bring. High -risk or so -called "unhealthy bonds" pay high interest interest rate due to greater risk of failure. The secure binding is onThe second end of the risk spectrum and due to its very low rurker, there is lower interest rates compared to other bonds.
Most investors are able to tolerate a small amount of risk that is own bonds or similar tools, even if they are technically unsecured. Not only is the risk of delay relatively small with these bonds, but if the company came under, the company holders have the first claim to anything left. For reasons, such as these are not secured bonds widely known or purchased, but if the maintenance of capital is the only predominant goal of the portfolio, the bond can be a wise bond.