What does Debt mean?
If someone is in debt that means he or she owes a certain amount to someone else. When it comes to credit cards, the term means that the sum owed is in the form of charge, and it is to a consumer’s bank account. This kind of debt, on a credit card account, can be incurred by using a credit card to acquire services and goods, or by withdrawing cash an automated teller machine, or by using so called “convenience checks”. Typically a credit card debt has a higher interest rate than other types of loans, that usually come with interest rates. This is because credit cad debts are not secure, like car loans and mortgages are, where the lender has the option of seizing property if the consumer fails to pay the loan.
Many companies as well as individual people take advantage of debt as a means to make large purchases, that they otherwise could not afford. Arranging a debt gives the borrowers permission to acquire money with the condition that they pay it back by a pre established due date, typically paying an interest on the money borrowed.
Commercial paper, loans, and bonds are all examples of debt. For instance, a corporation may want to borrow one million dollars in order to buy a piece of equipment. In such a case, the debt of one million has to be paid back, along with the interest that comes with it, to the lender at a determined later date.