Home » Business

Got Debt?

Dec 28, 2007
Debts, What Are They?

Debt is something that is owed to someone else. An individual person or company / business owing a debt is called a debtor. The entity that is owed the debt is is labeled a creditor. Debt is primarily used to borrow purchasing power with a promise to pay back at an agreed upon time. Most businesses / companies use debt as a tool of their overall corporate finance strategy.

Types Of Debt

There are unlimited types of debt obligations. They include but are not limited to mortgages, auto loans, student loans, credit cards and promissory notes. Most people borrow a large sum for major purchases, such as a mortgage or car loan, and they repay it with at an agreed upon interest rate over time or all at once at an agreed date (balloon payment). The total amount of money outstanding is normally called a debt. The debt will increase overtime due to interest accruing. In many systems of economics this effect is termed usury, in others, the term "usury" refers only to an excessive rate of interest, in excess to a reasonable profit for the risk accepted (think payday loans).

Big organizations can issue debt in the form of securities, known as bonds. Each bond entitles the holder to interest and principal repayments. Bonds are traded in the bond markets, and depending on the rating are relatively safe investments.
About the Author
When you are owed a debt you need a Collection Agency or request a free quote from a Collection Company
Please Rate:
(Average: Not rated)
Views: 218
Print Email Share
Article Categories