Borrowing and lending are two standard terms frequently occurring in the financial world. With the daily exchange of money, it becomes essential for money lenders and receivers to keep fixed-income securities.

Bonds and non-convertible debentures are the most common fixed-income securities in the financial world. However, many people need clarification on bonds with non-convertible debentures, even though they are incredibly different options. Let us dive deep into the core difference between bonds and non-convertible debentures.

What are Bonds?

A bond is a fixed-income security used to lend money to the government or a company. Usually, the money is lent at a specific interest rate, which the borrower has to pay along with the actual face value of the bond.

Governments, companies, and states generally use bonds to finance various projects and raise funds for a particular task. The creditor owns the bond along with the end date when the principal amount is due and the interest. 

A bond is an agreement between a creditor and a borrower.  Bonds act as a significant asset for investors. It contains all the principal amount, maturity date, and interest rate information. In a bond, the interest rate is often called the coupon rate.

What are Non-Convertible Debentures?

Non-convertible debentures, or NCDs, are often issued by renowned companies in the form of a public issue to attain long-term capital. These are fixed-income instruments offered at a relatively high interest rate compared to convertible debentures.

They are non-convertible debentures since they cannot be converted into equity or stocks. Non-convertible debentures also have a specific maturity date at which the principal amount, along with the interest, is to be paid by the money receiver. 

There are no collaterals offered in non-convertible debentures. NCDs are given on the creditworthiness of the issuer. There are also cumulative payout options in NCDs, and the interest amount can be paid monthly, quarterly, or yearly. 

Differences Between Bonds and Non-Convertible Debentures

Bonds are often confused with non-convertible debentures. However, there are significant differences between the two. In detail, Let us know the critical differences between bonds and non-convertible debentures. 

Conclusion

To sum up, bonds and non-convertible debentures are valuable assets for investors. While non-convertible debentures cannot be converted into company shares, bonds can be converted.

With their pros and cons, investors should consider both investment options before choosing one. However, this fact cannot be denied that bonds and non-convertible debentures are great investment options for great returns.