Legal Definitions - evidence of debt

An evidence of debt refers to any document or record that legally proves one party owes a financial obligation or money to another party. These documents establish the existence of the debt, its specific terms (such as the amount, interest rate, and repayment schedule), and the identities of the debtor (the one who owes) and the creditor (the one to whom the debt is owed). It serves as a formal acknowledgment and record of a financial commitment.

• Example 1: Mortgage Agreement

  A family purchases a new home and obtains a loan from a bank. They sign a detailed mortgage agreement and a promissory note. These documents specify the total amount borrowed, the interest rate, the monthly payment schedule, and the duration of the loan, along with the property being used as collateral.

  How it illustrates the term: The mortgage agreement and promissory note are clear examples of evidence of debt. They legally bind the family to repay the bank, outlining all the precise terms and conditions of their financial obligation for the home loan.

• Example 2: Corporate Bond Certificate

  A large technology company needs funds to expand its operations, so it issues corporate bonds to investors. Each investor who buys a bond receives a bond certificate, which is a formal document stating that the company promises to pay the bondholder a specific sum of money (the principal) on a future date, along with regular interest payments until that date.

  How it illustrates the term: The bond certificate serves as evidence of debt because it legally obligates the technology company to repay the bondholder according to the stated terms, including the principal amount, interest rate, and maturity date, thereby proving the company's financial commitment.

• Example 3: Car Loan Contract

  When an individual buys a new car using financing from a dealership or a bank, they sign a car loan contract. This contract details the purchase price, the amount financed, the annual percentage rate (APR), the number of payments, and the total amount to be repaid over the life of the loan.

  How it illustrates the term: The car loan contract is a definitive evidence of debt. It legally establishes the buyer's obligation to make payments to the lender for the vehicle, clearly outlining all the financial terms and conditions of that specific debt.