In debt investment, your fund manager, or the fintech through whom you are investing, lend the money to different companies. These investments earn interest. The interest and principal are payable as per a predefined timeline. Hence, the quality of the institution to whom the money is lent has a crucial role to play.
Credit risk is high when the possibility of the borrower defaulting on payment of interest or repayment of principal on the predefined day is high. The better the company from a fundamental and quality perspective, the lower the chances of issues with those investments
