Debt security

A debt security is a financial instrument that businesses or governments use to borrow money in the capital market. Debt securities are similar to loans, as they represent a loan made by the investor to the borrower. For borrowers, debt securities offer an alternative to loans, especially if the amounts involved are large. Interest payments, the term to maturity, and repayment obligations are specified from the outset, i.e., when the investor buys a debt security. Debt security holders receive regular interest payments (except for zero-coupon bonds) and, after the end of the debt security’s term, the invested amount.