Difference
between Debenture and loan
Difference between
debenture and loan can be expressed in term of security, rate of interest,
repayment of loan. Debenture is an instrument against which loan is raised,
while loan is an agreement between Borrower and lender.
1. Security
Debenture may be secured or
UN -secured, reputable company can issue UN secured debenture. In case of loan,
security is essential requirement for raising the funds i.e. assets are pledged
to raise loan.
2. Rate of Interest
In case of debenture rate
of interest is decided by the borrower, while in case of loan rate of interest
is decided by the financial institution i.e. lender.
3. Repayment of Loan
In case of denature loan
is repaid on maturity, while in case of loan, there are periodical repayment.
Therefore debenture does not impact short term cash flows, while loan has short
term cash flows implications.
4. Trading
Debenture being an
instrument can be traded in the bond market, while loan being a specific
agreement between two parties are not traded in the open market.
