Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders). Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely.

Bonds are a kind of debt security tool wherein the issuers of the Bonds owe an assured amount to the bondholders, who are basically the lenders of money. A Bond, therefore, represents a loan, accorded by an investor to a borrower. The issuer of Bond is obliged to pay the bondholder, the interest (the coupon) and/or repay the principal amount at a later date. It is a formal contract to repay the borrowed money with interest at fixed intervals. (for eg. semi annual,annualormonthly)

Bonds are typically Government Bonds or Corporate Bonds. The funds are basically used by the companies or municipalities to finance long term or current operations and projects. Bonds and stocks are both securities, but a major difference between the two is that stockholders have an equity stake in the company which makes them part owners. Whereas bondholders have a creditor stake in the company, which means they are the lenders. Another difference is that Bonds usually have a definite term after which they are redeemed on maturity, whereas stocks can be outstanding indefinitely.