Difference between Bonds and Debentures

Bonds and Debentures are very similar to each other in the sense that both are fixed income instruments that offer a very safe route of investment. However there are certain differences between the two which this blog will try to clear

1. The first major difference between the two is that the bonds are secured by some underlying assets. This means that in case a company defaults on the payment of principle and interests, the investor can claim on the asset. In simple terms no collateral is offered for debentures.

2. Bonds are generally issued by the government whereas the debentures are issued by the corporates

3. Because debentures are unsafe compared to bonds, interest rates offered are higher on debentures.

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