Debtfree Issue 202303 - DB SE
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DEBT REVIEW AND YOUR CREDIT SCORE<br />
WHAT ARE<br />
BONDS?<br />
No, not James Bond, the other bond.<br />
Think of bonds like loans that people or<br />
companies take out. When you buy a bond,<br />
you’re essentially lending money to the person<br />
or company (or bank) that issued the bond. In<br />
return, they promises to pay you the amount<br />
you loaned them, plus interest over a certain<br />
period of time.<br />
So, you lend them money now and you make<br />
a profit over time as they pay you back the<br />
loan amount with interest. It’s kind of how all<br />
credit works these days.<br />
Now, some bonds are considered riskier than<br />
others. For example, if you’re lending money<br />
to a company that’s struggling financially,<br />
there’s a higher chance that they might not be<br />
able to pay you back. So, if you invest in that<br />
risky company’s bonds, you might demand<br />
a higher interest rate to compensate for that<br />
risk.
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