Bond and Loan difference Explained

In this article we will discuss the difference between bank loan and bond in simple and easy way, So read this article till the end.

Although both bond and bank loan are related to loan, yet there is a difference, so let us know; Let’s discuss…

Note – If you want to understand the basics of share market from zero level then you should start with Part 1. – Share Market and Related

| difference between bond and bank loan

Whether we talk about bond or bank loan, both are loan but still there is a lot of difference between these two. Let’s see what it is.

⚫ Bank loan is issued by a bank i.e. the bank gives money here. Whereas when talking about bonds, it is issued by the government or company and money usually people give money here to the government or company.

In other words, bank loan is the loan which is issued by the bank and the bank charges interest in return. 

On the other hand, bond is such an instrument which is issued by the government or companies but the money is given by the public and this time the public takes interest from the government or companies on that money.

⚫ The most important difference between a bond and a loan is that the bond is tradable, that is, if you buy a bond, you can also sell it in the bond market. 

In other words, buying and selling of bonds is just like shares, like stocks, the market price of bonds also fluctuates.

On the other hand, talking about the loan, it is simply an agreement between the bank and the customer, in which the bank has the right to take all the policy decisions and decides what the term and conditions of the loan will be. 

And the most important thing is that there is no such market for it where you can buy and sell it, that is, it is generally not tradable.

⚫ The interest rate of a bond is fixed whereas the interest rate of a loan may or may not be fixed. It depends on the repo rate and that particular bank.

Overall this is the difference between bond and bank loan, hopefully you will understand. The link of other articles is given below, must read it too-

| Basic Concept Series (BCS)

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