Debt Definition: Debt occurs when one person, company, or party borrows a sum of money from another. During this exchange, there is an agreement that determines how much and when the borrower will repay the balance of the loan. The debt incurs when a party requires extra funds to purchase a large asset, such as property, a car, or a house, and may also be used to pay off other debts or loans as a means of consolidation.
Loans or debt are typically paid with interest, and additional fees or charges may result if payments are late or become delinquent. There are four main types of debt, including mortgaged, secured, unsecured, and revolving. It’s common for companies to issue debt to raise capital in the form of bonds.