Legal Definitions - credit instrument

Credit instrument

A credit instrument is a written document that shows someone owes money to another person or organization. Examples of credit instruments include bonds, loans, checks, and invoices. They are used by governments, companies, and individuals to borrow money or to show that someone owes them money.

• A company issues bonds to raise money from investors. The bond is a credit instrument that promises to pay back the money with interest.
• An individual takes out a loan from a bank to buy a car. The loan agreement is a credit instrument that outlines the terms of the loan, including the interest rate and repayment schedule.
• A business sends an invoice to a customer for goods or services provided. The invoice is a credit instrument that shows the amount owed and the payment terms.

These examples illustrate how credit instruments are used to document and manage debt. They provide a way for borrowers and lenders to formalize their agreements and ensure that everyone understands the terms of the transaction.