Bonds are issued as evidence of a loan. They may be backed with collateral or just the good faith and credit of the borrower. As an educated investor, you need to know the advantages and risks of bonds and whether they are secured or unsecured.
Bonds may be secured by collateral, which is the money or physical assets that a bond issuer (borrower) must give to investors if the bond defaults. Securing bonds ensures that capital will be available to pay the principal on a bond. Corporate bonds and municipal bonds may be secured or unsecured.
Federal government bonds, however, are unsecured and only backed by the good faith and credit of Uncle Sam.
Identifying Secured Bonds >>