Financial Definitions - Asset Backed Securities
Asset backed securities are bonds and/or notes that are backed up by accounts receivable or “loan paper” delegated by credit card companies, banks, or other lenders of credit. What usually happens is the creator of the accounts receivable paper and/or loan sells it to a trust. The trust in turns sells it as a security item(s) that have one thousand dollar minimum denomination and a term of 5 years (or less). It’s prudent for people who invest to take a good look at the inherent value of the original paper. Investors need to be aware of the finance company that is the insurer as well.
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