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| What is Debt? |
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| Written by JR Rooney |
| Monday, 01 December 2008 13:43 |
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Debts, What Are They? Debt is something that is owed. An individual or business owing a debt is called a debtor. The entity to whom a debt is owed is called a creditor. Debt is used to borrow purchasing power with a promise to repay at some point in the future. Many businesses use debt as a part of their overall corporate finance strategy. Some types of debt There are numerous types of debt obligations. They include loans, bonds, mortgages and promissory notes. It is common to borrow large sums for major purchases, such as a mortgage and pay it back with an agreed premium interest rate over time, or all at once at a later date (balloon payment). The amount of money outstanding is usually called a debt. The debt will increase through time if it is not repaid faster than it grows. In some systems of economics this effect is termed usury, in others, the term "usury" refers only to an excessive rate of interest, in excess of a reasonable profit for the risk accepted. Larger companies can issue debt in the form of securities, known as bonds. Each bond entitles the holder to specific interest and principal payments. Bonds are traded in the bond markets, and depending on the rating are relatively safe investments in comparison to stocks. If you need more, Google it. About the Author: When you are owed a debt you need a Collection Agency or request a free quote from a Collection Company Click here to get your own unique version of this article with free reprint rights. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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