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Debt
is
a
financial
that
must
be
repaid
.
In
the
modern
world
,
a
debt
may
be
a
large
sum
of
money
for
a
major
purchase
and
repaid
over
time
with
interest
.
Other
debts
may
from
the
use
of
credit
for
routine
purchases
.
Debt
may
be
secured
or
unsecured
.
A
debt
is
collateralized
,
meaning
the
borrower
has
pledged
property
that
can
be
seized
if
payments
are
in
default
.
debt
,
such
as
credit
card
debt
and
student
loan
debt
,
is
not
collateralized
.
The
most
common
forms
of
debt
are
loans
,
including
,
auto
loans
,
and
personal
loans
,
as
well
as
cards
.
Under
the
terms
of
a
most
loans
,
the
receives
a
set
amount
of
money
,
which
they
must
in
full
by
a
certain
date
,
which
may
be
months
or
years
in
the
.
The
terms
of
the
loan
will
also
stipulate
the
of
interest
that
the
borrower
is
required
to
pay
,
expressed
as
a
percentage
of
the
amount
.
Interest
the
lender
for
taking
on
the
risk
of
the
loan
.
Credit
Card
Debt
Credit
cards
and
lines
of
credit
operate
a
little
differently
.
They
what's
known
as
revolving
or
credit
,
with
no
fixed
end
date
.
The
borrower
is
assigned
a
credit
and
they
can
use
their
credit
card
or
credit
line
repeatedly
as
long
as
they
don't
that
limit
.
An
Example
of
Debt
When
students
take
out
federal
loans
to
pay
for
college
,
they
will
receive
a
certain
of
money
that
they
agree
to
pay
in
the
future
with
.
Students
now
have
the
option
of
several
different
repayment
plans
.
If
they
choose
what's
known
as
the
standard
repayment
plan
,
they
will
be
required
to
make
monthly
payments
for
10
years
,
at
which
point
their
debt
will
be
completely
paid
off
.
Each
of
those
monthly
payments
will
represent
a
of
the
principal
they
owe
plus
interest
on
their
debt
.
The
interest
on
federal
student
loans
for
undergraduates
is
currently
6
.
53%
.
Debt
can
come
in
a
variety
of
forms
,
each
with
their
own
uses
and
.
Secured
debt
is
also
known
as
collateralized
debt
.
That
means
the
borrower
has
something
of
value
to
back
up
the
debt
.
With
a
car
loan
,
for
example
,
the
usually
serves
as
collateral
.
If
the
borrower
to
repay
the
money
they
borrowed
to
buy
the
car
,
the
lender
can
and
sell
it
.
Similarly
,
when
someone
takes
out
a
to
buy
a
home
,
the
home
itself
typically
serves
as
collateral
.
If
the
borrower
fails
to
make
payments
,
the
can
foreclose
and
take
the
home
.
A
company
that
wants
to
borrow
money
might
pledge
a
piece
of
,
real
estate
,
or
cash
in
the
bank
as
collateral
.
Understanding
Unsecured
Debt
Unsecured
debt
does
not
require
any
collateral
as
security
.
Instead
,
the
lender
whether
to
grant
a
loan
based
on
the
borrower's
,
as
indicated
by
their
credit
score
,
credit
history
,
and
other
factors
.
Most
credit
cards
and
most
personal
loans
are
examples
of
unsecured
debt
.
Because
unsecured
debt
can
be
to
the
lender
it
generally
commands
a
interest
rate
than
secured
debt
.
Revolving
debt
provides
the
borrower
with
a
of
credit
that
they
are
able
to
borrow
from
as
they
wish
.
The
borrower
can
take
up
to
a
certain
amount
,
pay
the
debt
back
,
and
borrow
up
to
that
amount
again
.
The
most
common
form
of
revolving
debt
is
credit
card
debt
.
As
long
as
the
borrower
their
obligations
,
typically
by
making
monthly
of
at
least
a
certain
minimum
amount
,
the
line
of
credit
remains
available
for
as
long
as
the
account
is
active
.
Over
time
,
with
a
repayment
history
,
the
amount
of
revolving
credit
that's
available
to
the
borrower
may
increase
.
A
mortgage
is
a
type
of
secured
debt
used
to
purchase
real
estate
,
such
as
a
house
or
condo
.
Mortgages
are
usually
paid
back
over
long
periods
,
such
as
15
or
30
years
.
Mortgages
are
often
the
debt
,
apart
from
student
loans
,
that
consumers
will
ever
take
on
,
and
they
come
in
many
different
varieties
.
Two
broad
categories
are
fixed
-
rate
mortgages
and
-
rate
mortgages
,
or
ARMs
.
In
the
case
of
ARMs
,
the
interest
rate
can
change
periodically
,
usually
based
on
the
performance
of
a
particular
index
.
Companies
that
want
to
borrow
money
have
some
options
that
aren't
to
individual
consumers
.
In
addition
to
from
a
bank
or
other
lender
,
they
are
often
able
to
issue
and
commercial
paper
.
Bonds
are
a
debt
that
allow
a
company
to
borrow
funds
from
investors
by
to
repay
the
money
with
interest
.
Both
individuals
and
investment
firms
can
bonds
,
which
typically
carry
a
fixed
interest
,
or
coupon
,
rate
.
If
a
company
needs
to
$1
million
to
fund
the
purchase
of
new
equipment
,
for
example
,
it
could
issue
1
,
000
bonds
with
a
face
value
of
$1
,
000
each
.
Bonds
commonly
become
due
at
a
certain
date
in
the
future
,
called
the
date
,
at
which
time
the
investor
will
receive
the
bond's
full
face
value
.
In
addition
,
the
investor
will
have
received
regular
payments
throughout
the
intervening
years
.
Commercial
paper
is
short
-
term
corporate
debt
with
a
maturity
of
270
days
or
less
.
Advantages
and
Disadvantages
of
Debt
Properly
used
,
debt
can
be
to
individuals
and
companies
alike
.
Few
people
could
buy
a
home
without
a
,
and
many
people
couldn't
afford
a
new
car
without
an
auto
loan
.
Credit
cards
can
be
a
great
and
even
a
lifesaver
in
emergency
situations
.
For
companies
,
access
to
debt
can
make
all
the
difference
in
their
ability
to
expand
and
.
But
debt
can
be
,
for
borrower
and
lender
alike
.
With
enough
credit
cards
in
their
,
consumers
can
easily
accumulate
an
amount
of
debt
,
especially
if
they
lose
their
jobs
or
face
another
serious
.
Companies
that
take
on
a
large
amount
of
may
not
be
able
to
make
their
payments
if
sales
drop
,
putting
the
business
in
of
bankruptcy
.
Even
if
it
doesn't
reach
that
point
,
having
too
much
debt
can
a
crippling
burden
on
a
company
,
requiring
it
to
devote
much
of
its
income
to
debt
repayment
rather
than
more
productive
purposes
.
The
best
way
to
stay
out
of
debt
is
to
have
a
for
paying
it
off
.
That
starts
with
not
taking
on
too
much
in
the
first
place
.
For
example
,
consumers
should
pay
attention
to
their
credit
utilization
ratio
,
also
known
as
a
debt
-
to
-
ratio
.
That's
the
amount
of
debt
they
currently
as
a
percentage
of
the
total
amount
of
credit
they
have
available
to
them
.
For
example
,
if
someone
has
two
credit
cards
with
a
combined
credit
limit
of
$10
,
000
,
and
they
currently
owe
$5
,
000
on
those
cards
,
their
credit
utilization
ratio
is
50%
.
Lenders
typically
prefer
that
consumers
their
credit
utilization
ratios
below
30%
,
and
credit
scores
individuals
for
exceeding
that
level
.
4
The
fastest
way
to
pay
off
debt
is
to
a
greater
portion
of
your
income
to
monthly
debt
payments
,
ideally
paying
off
credit
card
debts
in
full
each
month
any
interest
charges
kick
in
.
If
you
need
to
prioritize
,
experts
generally
recommend
paying
off
your
highest
interest
debts
first
and
working
your
way
down
from
there
.
You
can
also
consolidate
several
debts
into
one
,
which
may
make
sense
if
the
new
loan
carries
a
interest
rate
.
Similarly
,
you
may
be
able
to
your
credit
card
balances
to
another
card
with
a
lower
interest
rate
or
,
ideally
,
a
0%
rate
for
a
period
of
time
.
What
Is
the
Difference
Between
Debt
and
a
Loan
?
Debt
and
loan
are
often
used
synonymously
,
but
there
are
slight
differences
.
is
anything
owed
by
one
person
to
another
.
Debt
can
involve
real
property
,
money
,
services
,
or
other
consideration
.
In
corporate
finance
,
debt
is
more
narrowly
defined
as
money
raised
through
the
issuance
of
bonds
.
A
is
a
form
of
debt
but
,
more
specifically
,
an
agreement
in
which
one
party
lends
money
to
another
.
The
lender
sets
repayment
terms
,
including
how
much
is
to
be
repaid
and
when
,
as
well
as
the
interest
rate
on
the
debt
.
What
Is
the
Difference
Between
Debt
and
Credit
?
Debt
is
amount
of
money
you
owe
,
while
is
the
amount
of
money
you
have
available
to
you
to
borrow
.
For
example
,
unless
you
have
maxed
out
your
credit
cards
,
your
debt
is
less
than
your
credit
.
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