Definition
Debentures are a type of loan that companies take from investors. When you invest in debentures, you are lending money to the company, and in return, the company pays you regular interest and returns the amount after a fixed period.
Example
If you invest Rs 10,000 in a company’s debenture with an interest rate of 8%, you will earn Rs 800 per year as interest. At the end of the period, you will get back your Rs 10,000.
Caution
Debentures depend on the company’s ability to repay. If the company faces financial problems, there is a risk of delayed or missed payments, so investors should check the company’s creditworthiness before investing.