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For people who don't consider themselves financial gurus, sometimes certain terms can seem confusing or difficult to understand.  Though it may be difficult, it is important to understand these terms and how they relate to us.  With a little research, it is easy to get a basic understanding of what these terms mean.  If we don't understand, we may run into a situation that costs us money due to our own ignorance.  Understanding finances is essential to managing our own.
One of these terms to know is a surety bond.  First, to better understand surety bonds we might discuss the definition of the more familiar financial bonds.  A bond is a type of loan, but instead of being issued by a financial institution it is issued by you, the investor.  Companies, governments, and institutions need money to operate.  In order to get needed funds,You are not allowed to view links. Register or Login, often one of these types of institutions will offer the sale of bonds.  The investor will purchase the bond, or in other words, issue the loan at the principal price.  During a period called the maturity period, the issuer must repay the bond amount with interest to the investor.  This bond is an agreement or contract between the two parties that each will keep their end of the bargain.
A surety bond is similar to the bond issued in the above scenario, except a surety bond involves three parties instead of two and is more like a contract for services than a contract for finances.  A surety bond usually involves the guarantee of a service in exchange for compensation.  As mentioned,You are not allowed to view links. Register or Login, a surety bond involves three parties: the principal,You are not allowed to view links. Register or Login, or the primary party performing a contractual obligation; the obligee,You are not allowed to view links. Register or Login, or party who is the recipient of the obligation; and the surety, or the party that ensures the principal's part of the bargain will be performed. 
The purpose of a surety bond is to protect public and private interests against financial loss.  The surety party of a surety bond is usually a bond company, which will issue the bond to the obligee.  However, the surety must first determine that the principal is qualified to become bonded for whatever service or performance they have been contracted for.
Surety bonds are a way to guarantee that everyone wins.  The obligee will obtain their performance and service from the principal as guaranteed by the surety.  And the principal will obtain compensation for their performance and service.  Surety bonds live up to their name by ensuring that each party gets what they want out of the bond.
Understanding Terms In Finance: Surety Bonds