What is Private Debt?
Private Debt is defined as the debt or loan provided by private entities such as banks, and private firms, instead of public institutions and government, and is accommodated by an individual, non-government organisation, or by any private business. The basic aim behind private debt is the provision of a source of financing for individuals or companies. Private businesses or individuals can take Private Debt in many forms such as personal loans, business loans, credit loans, and corporate bonds. As a guarantee and for the purpose of security, credit providers ask for security in the form of any asset. Debt taken from credit providers results in high charges for mispayments, security-related issues, and high interest.
Some of the most common types of private debt include corporate bonds, mezzanine financing, senior secured debt, junior debt, asset-based lending, real estate financing, etc.
Difference between Private Debt and Public Debt
Debt is an obligation of a party to pay back the money borrowed from another party. Various companies and individuals use debt to make those large purchases that they otherwise cannot afford. It is essential that the debt is paid back to the lender, usually along with the interest. Public Debt and Private Debt are two such kinds of debt.
Table of Content
- What is Public Debt?
- What is Private Debt?
- Difference between Public Debt and Private Debt