What are Bonds and How do they Work?



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Bonds are some of the most necessary and fundamental vehicles in the financial sector. They allow towns, governments, companies, and other groups to get funding. Bonds are essentially just I.O.Us to the person giving you money, the lender, that says you’re going to pay them back sometime in the future.

They’re a fancy form of a loan that get’s companies and governments funding when they need it. What makes bonds different from loans is that they’re a form of security, in that you can buy a bond and start getting payments from the company that owes you. In essence, bonds are securitized loans.

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