Private debt

Private debt is considered to be the debt of any person, natural or legal that is not a Public Administration. 

That is, private debt is that debt is generated when a person asks for a loan or credit , when a company issues bonds , promissory notes , etc. All of that is private debt.

The private debt of a country is the sum of all debts held by all businesses, families and financial entities that reside in that country. Regardless, yes, with whom you have the debt, if it is with national or international investors.

Objectives and interest rates of private debt

These debts are used to finance the expenses of those who request them, but unlike the public debt , most of these debts come from loans and loans. Although there are also many companies that issue debt securities to be financed, practically using the same system as a country’s debt issues.

The interest rate on these issues will depend on the confidence of the markets in which this company or financial entity will return the money. The rating agencies also note the probability of payment or credit quality of these issues, as long as the company requests it.

Example of private debt

If a telephone company needs € 100,000, it can issue 100 bonds of € 1,000 each at 7% interest, promising investors that within one year they will deliver € 1,007 for each bond.

by Abdullah Sam
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