Most of us hate debt. Don’t get me wrong. I mean Bad debt. In my last post, there are two types of debt. One is good and the other is bad. Do you know the difference? If not? Refer to my other post - Good Debt Vs Bad Debt.
Do you want to know what Debt is?
In this post, I collected information/definitions of debt from the top most reliable articles about what is debt.
According to Wikipedia, “A debt is an obligation owed by one party (the debtor) to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.
A debt is created when a creditor agrees to lend a sum of assets to a debtor. Debt is usually granted with expected repayment; in modern society, in most cases, of the original sum plus interest.
In finance, debt is a means of using anticipated future purchasing power in the present before it has actually been earned.”
According to Investorwords, “An amount owed to a person or organization for funds borrowed. Debt can be represented by a loan note, bond, mortgage or other form stating repayment terms and, if applicable, interest requirements. These different forms all imply intent to pay back an amount owed by a specific date, which is set forth in the repayment terms.”
According to Treasurydirect.gov, “Debt is money one person, organization, or government owes to another person, organization, or government. Typically, the person who borrows the money has a limited amount of time to pay back that money with interest (an additional amount you pay to use borrowed money).”
Ok, that’s enough. They already defined it for you. In simple terms, Debt is a value owed to another party and must be paid with or without an interest. Debt is an obligation to pay for your loaned amount.
For example, you want to buy a car. Let’s be specific. You want to buy a Lamborghini Aventador LP700-4 that is priced at $387,000. Let’s say that you had the capability to buy that car but, you don’t have savings right now. You make a loan in a bank. A Car loan to finance your greatest dream in owning a Lamborghini. Great! You owned a Lamborghini but, as an obligation, you also acquired a Debt to pay from your bank. While enjoying your brand new car, you are paying your car every month or depending on your preferred agreement to your bank with interest.
Image credit to carscoop.blogspot.com
May this post help you define what is debt?
Search Terms:
- what is debt
- debt is an amount owed to a person or organisation for funds borrowed debt can be represented by a loan note bond mortgage or other form these different forms all imply intent to pay back an amount owed by a specific date which is set forth in the repayme
- definition of bad debt
- what is bad debt
Read more about Business, Money and Finance:
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4:25 pm on January 27th, 2012
this is a very educational and informational contribution. thank you very mcuh
2:37 am on January 28th, 2012
Great stuff. People will surely learn from this post.
2:29 pm on January 28th, 2012
Nice entry! though i hate math, i did learn and refresh my math skills in these
Thanks
6:42 am on January 28th, 2012
very informative! what I want now, is to be debt-free!
4:12 pm on January 28th, 2012
and you post pa my favorite car! hehe..
) I can't afford to borrow that much fund too so hanggang tingin nalang ako.. hehe. I'm a CPA by the way, in accounting the best term for debt is Liability or simply borrowings. Of course ideally the best and wise approach in business or personal life is always to pay in cash but unfortunately we can't afford to always practice that. So sa personal life the key is always living within your means, and always target to be debt free! 