Debt is defined as something, which is owed. The term debt is normally used to refer to assets that are payable by a debtor. However, debt can also be used to mean other dues. In the present day world of business, debt is an important concept that needs to be tackled efficiently.
Generation of Debt
If a creditor provides the debtor with certain part of his assets, a debt would be generated.
Creditor provides a debt to the debtor with the expectation that it would be paid back.
Use of Debt
As described above, debt is an important concept in the modern business world. Nowadays, a number of business entities especially the companies and corporations regard debt to be an important part of the business strategies followed by them.
Repayment of Debt
Repayment of debt is an important process in the context of debt. Normally before a debt is provided, the debtor and the creditor decide the terms and conditions of repayment. A debt is mostly repaid in cash. However, under certain circumstances the debtor may repay the debt in goods.
The terms of debt vary with regard to the time of repayment. Some times the debtor pays his debt off at regular intervals of time. In other occasions the debtor may pay it at one go. In such cases the repayment is made at the end of the term period of the debt.
Types of Debt
There are different kinds of debt:
There are secured debts and unsecured debts. The secured debts are those debts, which are provided by the creditor against a property of the debtor. In this type of debt the creditor provides the debtor with a big amount of money.
However, if the debtor is unable to repay the debt according to the terms that had been fixed before the loan was provided then the creditor can take away the particular property that had been pledged against the loan. The unsecured debts are those where the debtor does not attach any property against the debt amount.
Last Updated on : 1st July 2013