Financial Friday: Debt

What Is Debt?

Debt is something, usually money, borrowed by one party from another. Many corporations and individuals use debt to make large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back later, usually with interest.

KEY TAKEAWAYS

• Debt is money borrowed by one party from another.
• Many corporations and individuals use debt as a method of making large purchases that they could not afford under normal circumstances.
• In a debt-based financial arrangement, the borrowing party gets permission to borrow money under the condition that it must be paid back later, usually with interest.
• Debt can be classified into four main categories: secured, unsecured, revolving, or mortgaged.

Types of Debt

There are four main categories of debt. Most debt can be classified as either secured debt, unsecured debt, revolving debt, or a mortgage. We will cover each one of these areas in future posts.

A Financial Element, similar to a literary element, refers to components of a Financial Narrative. Understanding the financial elements can help us in creating and planning Your Financial Narrative. We will continue to look at various other financial elements each week as a part of the Financial Fridays