Have you ever gotten really peeved at the person who collected your loan payments, credit card bills, and rent money? I bet that you wish you could be in their shoes, demanding payment with a smirk on your face. What if I told you that you have the opportunity to not only have that power, but also make some extra money along with it? Welcome to the world of bonds.

A bond is a loan that you give to a group. YOU are the lender. You give money to a borrower, and they are obligated to pay you back. You don’t own a piece of the group, though. That’s a stock.

But people don’t lend out money in bonds out of their kindness of their heart. The most important thing to understand about bonds is that whoever buys the bond expects to get their money back PLUS a little extra money. You scratch their back, and they give you a massage. (I KNOW YOU’RE THINKING DIRTY THOUGHTS SO STOP IT!).

Who issues bonds? Well, who doesn’t? The United States government needs money all the time (Area 51 drains a lot of power), and they don’t have stocks to depend on, so they sell bonds to help pay the bills and use taxes to pay you back.

Municipalities (try saying that ten times fast) are a fancy way to talk about state and town governments, and they also sell bonds to pay for projects like roads, parks, and to patch things up after the local supervillian blew up the water tower AGAIN. Through things like toll roads and taxes, a municipality can scrape up the cash to pay you back.

Even companies want to bond with you. (Enjoy that pun? No? Well, get used to it!). Corporations are like money machines, and bonds help them grease the engines swimmingly. Because they use their profits to pay you back, companies promise that you’ll profit as well. (The key word is promise, but as you’ll find out, promises sometimes break.) Companies are obligated to pay bond owners back, unlike a stock. The bond people are the first in line to make money from the companies. By the way, don’t call the extra money that a company pays you a dividend. That term only applies to stocks. Just a heads up so you don’t embarrass yourself talking investing at a cocktail party. I’m sure you can find other ways to embarrass yourself.

Does that sound simple? Are you ready to buy some bonds? NOT SO FAST! Bonds are actually more complicated to understand than stocks. Fortunately, our content and your wonderful personal finance guide are here to spend some bonding time with you. Are you curious about how a bond works? Or maybe you just want to know about buying and selling bonds.  So let’s bond about bonds! (I’m sorry, but this pun is too easy.)