A term bond comes due in a single maturity several years after the date of its issuance. An example is $50 million of 20-year term bonds would pay interest every year for 20 years, with the entire $50 million in principal due at the end of the 20th year.
Serial bonds can be thought of as a collection or series of term bonds. A bond issue with serial bonds is structured so that rather than waiting to pay principal until the very end of the term, portions of principal are paid in installments every year, along with periodic interest. For example, to finance a project over 20 years, an issuer could structure a bond issue to have bonds maturing each year for 20 years, with an amount of principal payable each year, in addition to interest. This could be structured with equal amounts of serial bonds maturing each year or having level payments of principal and interest.
Each set of serial bonds in a bond issue may have different interest rates based on their maturities. Maturities toward the beginning of the overall term usually have lower interest rates than maturities toward the end of the term.
