What do debts mean

It is calculated by comparing the current value, sometimes known as market value of an asset or investment, to the amount paid when you originally bought it. Description: Capital growth can be measured on assets which are owned by promoters or individual s. In simple words, assets which are in the name of a co. Invoice financing is a form of short term borrowing which is extended by the bank or a lender to its customers based on unpaid invoices.

Invoice financing is often carried out to meet short-term liquidity needs of the company. Description: Invoice financing allows the company or a firm to meet its short-term liquidity needs based on the invoices generated which are still unpaid by its customers. When transactions are recorded in the books of accounts as they occur even if the payment for that particular product or service has not been received or made, it is known as accrual based accounting.

This method is more appropriate in assessing the health of the organisation in financial terms. Description: To understand accrual accounting, let's first understand what we mean when we say the w.

Chattel mortgage is a loan extended to an individual or a company on a movable property. Description: Chattel mortgages are secured loans attached to a personal movable property which is used to extend the loan to an individual or a business owner.

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ET Engage. ET Secure IT. Suggest a new Definition Proposed definitions will be considered for inclusion in the Economictimes. Debt Consolidation Definition: Debt consolidation means combining more than one debt obligation into a new loan with a favourable term structure such as lower interest rate structure, tenure, etc. Debt is something, usually money, borrowed by one party from another.

Debt is used by many corporations and individuals to make large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

The most common forms of debt are loans, including mortgages, auto loans, personal loans, and credit card debt. Under the terms of a loan, the borrower is required to repay the balance of the loan by a certain date, typically several years in the future.

The terms of the loan also stipulate the amount of interest that the borrower is required to pay annually, expressed as a percentage of the loan amount. Interest is used to ensure that the lender is compensated for taking on the risk of the loan while also encouraging the borrower to repay the loan quickly to limit his total interest expense. Credit card debt operates in the same way as a loan, except that the borrowed amount changes over time according to the borrower's need—up to a predetermined limit—and has a rolling, or open-ended, repayment date.

Certain types of loans, including student loans and personal loans , can be consolidated. There are four main categories of debt. Most debt can be classified as either secured debt, unsecured debt, revolving debt, or a mortgage. Secured debt is collateralized debt.

Debtees usually require the collateral to be property or assets with a large enough value to cover the amount of the debt. Examples of collateral include vehicles, houses, boats, securities, and investments.

These items are pledged as security and the agreement is created with a lien. Upon default, the collateral may be sold or liquidated, with the proceeds used to repay the loan.

Like most classes of debt, secured debt often requires a vetting process to verify the creditworthiness of the borrower and their ability to pay. In addition to the standard review of income and employment status, the ability to pay may include verifying the collateral and assessing its value. Unsecured debt is debt that does not require collateral as security. The creditworthiness and the debtor's ability to repay are reviewed before consideration is given.

Since no collateral assignment is issued, the debtor's credit profile is the primary factor used in determining whether to approve or deny lending. Examples of unsecured debt include unsecured credit cards, automobile loans, and student loans. How much is loaned is often based on the debtor's financial position, including how much they earn, how much liquid cash is available, and their employment status.

Revolving debt is a line of credit or an amount that a borrower can continuously borrow from. In other words, the borrower may use funds up to a certain amount, pay it back, and borrow up to that amount again. The most common form of revolving debt is credit card debt.

The card issuer initiates the agreement by offering a line of credit to the borrower. As long as the borrower fulfills their obligations, the line of credit is available for as long as the account is active. With a favorable repayment history, the amount of revolving debt may increase. A mortgage is a debt issued to purchase real estate, such as a house or condo. It is a form of secured debt as the subject real estate is used as collateral against the loan.

However, mortgages are so unique that they deserve their own debt classification. There are different types of mortgage loans, including Federal Housing Administration FHA , conventional, rural development, and adjustable-rate mortgages ARMs , to name a few. In general, lenders use a baseline credit score for approval, and those minimum requirements may vary according to the type of mortgage. Mortgages are most likely the largest debt, apart from student loans, that consumers will ever owe.

Mortgages are usually amortized over long periods, such as 15 or 30 years. In addition to loans and credit card debt, companies that need to borrow funds have other debt options. Bonds and commercial paper are common types of corporate debt that are not available to individuals. Bonds are a type of debt instrument that allows a company to generate funds by selling the promise of repayment to investors.

Both individuals and institutional investment firms can purchase bonds, which typically carry a set interest, or coupon, rate. Bondholders are promised repayment of the face value of the bond at a certain date in the future, called the maturity date , in addition to the promise of regular interest payments throughout the intervening years. Bonds work just like loans, except the company is the borrower, and the investors are the lenders, or creditors.

In corporate finance, there is a lot of attention paid to the amount of debt a company has. A company that has a large amount of debt may not be able to make its interest payments if sales drop, putting the business in danger of bankruptcy.

Conversely, a company that uses no debt may be missing out on important expansion opportunities. Securing debt from a financial institution allows companies access to the capital needed to perform certain tasks or complete projects. Contrary to stockholders' involvement in the management of a company, the financier of debt has no involvement in how the company is managed. Also, the interest expense is tax-deductible.

The following table shows the increase of the funded debt since They were making money on it, but there was so much debt to begin with. All rights reserved. Filters 0. Words form: debts. See word origin. Debt is defined as owing money, owed money that is past due or the feeling as if you owe someone something. A sin. An obligation or liability to pay or return something.

The condition of owing. To be in debt a thousand dollars. A specific sum of money due as a result of a written or verbal agreement or by operation of law.