Private debt refers to debt incurred by companies or other non-governmental institutions to fund their activities or acquire assets. Unlike public debt, which is issued by governments, private debt is issued by the private sector.
Private debt can take on many different forms, including bank loans, corporate bonds, mortgage debt, credit cards, student loans and other financial instruments. Companies can issue debt to fund expansions, investments in assets or to manage their daily undertakings. Individuals can acquire debt to purchase homes, cars, finance their education or even to cover their personal expenses.
Many companies also issue debt securities to fund themselves, using a system that in essence is the same as a country's debt issues. There are three types of private debt:
- Covered bonds
- Senior debt
- Subordinated debt