Length of Long-Term Notes
- Long-term notes are those that come due in more than one year. There are a variety of lengths in the long-term range. The attraction to this kind of note is that you can lock in an interest income for longer than the short term.
Type of Debt Represented
- Whereas bonds are government or corporate debt that is issued to many creditors at once, a note is debt from a bank or other type of institution that is issued to the note holder only. In effect, when you purchase a note, you are loaning a bank or financial institution money at a set interest rate.
- You can sell long-term notes. Because they offer an interest rate for an extended period, they can be attractive to other investors who will buy them from you. If average interest rates have gone down since you bought the note, you may even get a premium price for the note. In other words, investors may be willing to pay extra for it to get the attractive interest rate.
- When buying long-term notes, it is important to know whether it is a new issue or an old issue. A new issue has recently been offered by a bank or financial institution, and no one has purchased it yet. This means you will benefit from the interest it pays for the full term of the note. If it is not a new issue, that means someone else bought it and now wants to sell it. You will only receive the remaining interest the note will pay until it matures.