ADM 626 Week 3 dq
Debt is something mostly money that is owed or due. It is also an amount of money that is borrowed from a financial institution or between one party from another. The parties involved are the borrower and the creditor who agree to the terms and conditions of payment.
The Types Of Debts Include:
Unsecured debt- this type of debt does not include individual’s personal loan and credit cards
Non-deductible debt it is kind of loan that does not purchase an appreciating asset or skill.
Fixed payment term the loan is set to be paid for a certain specific period of time. An example is a mortgage and student loan
Non-deductible – this loan that is not used to purchase a new skill or appreciating asset.
Deductible debt –it is a loan that betters the personal situation of an individual. It includes tax benefits.
Variable repayment period- it is a loan that has no specific date of paying the debt.
Variable interest rate debt- the interest changes over the duration of the loan.
The forms of debts include; student loans, mortgages, money to purchase land and other assets depending with the borrower. The forms of debts are to be met with the terms and conditions failure to which an action is taken.
Debt instruments are used to raise and generate capital. They include; loans, bonds, and debenture. Debt instruments are vital in the life of an individual who has a financial crisis. For example, a loan can help one to pay an education fee which is essential in the economy. It is also a loan that can make one purchase a good house and improve the living standards. Bonds are helpful in investments to a company. Debentures are commonly used by investors for they provide guaranteed fixed rates of income. However, debt instruments rate not applicable to those who have no means of income (“What are the main categories of debt?”, 2017). It limits them from securing a loan from financial institutions. Terms and conditions of debt instruments are harsh to investors who do not meet them. Failure to meet the specific time of repayment results in harsh penalties.
What are the main categories of debt?. (2017). Investopedia. Retrieved 7 April 2017, from http://www.investopedia.com/ask/answers/110614/what-are-main-categories-debt.asp