Debt

Debt, by definition, is money that is owed.  There are many forms of debt.  Intrinsically, debt is money that is borrowed from someone else where in the borrower agrees to pay the money back.  Usually, debts are established in some form of contract.  The person who borrows money is known as the debtor and the person, or entity that lends the money to the debtor is caller a creditor.  Some agreements allow the debtor to pay to debt off over time and sometimes, the debt is paid off all at once.  The arrangements for repayment of debts are arranged on a personal to professional level.

The most basic example of a debt is called a loan.  In a loan situation, the creditor loans the debtor an agreed some of money.  The debtor then pays off the loan plus interest, which is usually agreed to before the arrangement, takes place.  Interest is a percentage of the debt that is added on to the debt itself or the cost for borrowing.  Using this method, banks are able to make money for the service they offer individuals and businesses seeking loans and other monetary transactions.  A syndicated loan is someone who borrows from more than one creditor.  This usually occurs when the amount needed by the borrower supersedes what one creditor can give.  As a result, multiple creditors will coordinate to lend the money to the borrower.

The most popular form of debt in this country is credit card debt.  Credit card debt occurs when a bank or credit card company gives a consumer a line of credit to which the consumer must make monthly payments on the debt plus interest.  This line of credit is pre-approved so the borrower can only spend a set limit before having to pay off the debt.  Many Americans utilize these forms of loan irresponsibly and thus, take on large forms of debt.  Another popular form of debt is called a mortgage.  A mortgage is a debt that is incurred in the attempt to borrow money to pay for a house or building.  A bank loans money to an individual with the intent of having the debt paid off over a set period of years with applying interest.