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Home > Financial Services > Debt Services > Debt: Definition and Important Aspects
Debt: Definition and Important Aspects
A debt is something (generally money) that is owed to somebody. That “somebody” can be a bank, a friend or even a relative. The person who owes is called the debtor, and the person or institution to which the debt is owed is called a creditor. Debts are a lifestyle, and it is valid to say that almost everybody has acquired debts to buy homes, cars, or many other things. Big companies use debt as part of their financial strategies.
There are different kinds of debts; some of them are loans, bonds, mortgages and promissory notes. Normally debts consist in large sums of money that people need to obtain or get different goods. When you get a debt, you must know that the amount you will pay is not just the money that you borrow. You will also acquire interest on the debt that you must pay with the debt in the time established by the creditor.
Sometimes the interest on a debt is exaggerated. This is known as usury, and often the usury depends on the amount of money borrowed. Big companies can launch debts in the form of securities known as bonds. Every bond allows the possessor to gain interest and main repayments. Bonds are bought and sold in bond markets and are commonly used as relatively safe investments.
As you know, debts are normally linked to a specific currency. Inflation and devaluation are present in all the countries of the world every day, and this makes debts bigger every day too. Thus, if you are planning to get a debt with a bank or other institution, you must be very careful and know all the conditions of the debt.
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