what is a debt instrument 
a debt instrument is any financial tool used to raise capital it is a documented binding obligation between two parties in which one party lends funds to another with the repayment method specified in a contract some are secured by collateral and most involve interest a schedule for payments and time frame to maturity if it has a maturity date investopedia xiaojie liuunderstanding debt instrumentsany type of instrument primarily classified as debt can be considered a debt instrument generally the instruments used are some form of term debt credit or other revolving debt credit instruments that you can continually draw on with repayment conditions defined in a contract credit cards lines of credit loans and bonds can all be considered debt instruments a debt instrument typically focuses on debt capital raised by governments and private or public companies the issuance markets for these entities vary substantially by the type of debt instrument credit cards and lines of credit can be used to obtain capital these revolving debt lines usually have a simple structure and only one lender they are also not typically associated with a primary or secondary market for securitization more complex debt instruments involve advanced contract structuring multiple lenders and investors usually investing through an organized marketplace types of debt instrumentsdebt is typically a top choice for raising capital because it comes with a defined schedule for repayment this comes with less risk for the lender and borrower which allows for lower interest payments debt securities are a more complex debt instrument involving greater structuring if a business structures its debt to obtain capital from multiple lenders or investors through an organized marketplace it is usually characterized as a debt security instrument these are complex as they are structured for issuance to multiple investors some common debt security instruments are these debt security instruments allow capital to be obtained from multiple investors they can be structured with either short term or long term maturities short term debt securities are paid back to investors and closed within one year long term debt securities require payments to investors for more than one year treasury bonds come in many forms denoted across a yield curve the u s treasury issues three types of debt security instruments bills notes and bonds each of these offerings is a debt security instrument the u s government offers to the public to raise capital to fund the government municipal bonds are a type of debt security instrument issued by state and local governments to fund infrastructure projects municipal bond security investors are primarily institutional investors such as mutual funds corporate bonds are a type of debt security instrument used to raise capital from the investing public corporate bonds are structured with different maturities which influence their interest rate mutual funds are usually some of the most prominent corporate bond investors however retail investors with a brokerage account may also be able to invest in corporate bonds through their broker corporate bonds also have an active secondary market that retail and institutional investors can use alternatively structured debt security productsthere are also various alternatively structured debt security products in the market primarily used as debt security instruments by financial institutions these offerings include a bundle of assets issued as debt security financial institutions and agencies may choose to bundle products from their balance sheet such as debt into a single security which is then used to raise capital while segregating the assets 