Definition of Debt

Debt is defined as an amount of money borrowed/loaned by a person from another. Debt is commonly used by many firms and individuals for the sake of making big purchases that are difficult to afford under normal situations.

A debt arrangement makes it easier for the borrower to take loan on easy installments & terms but needs to be pay back on a decided date along with the interest specified.
Loans like, mortgages and auto loans, and credit card debt are the most commonly traded debts. Debt is based on the principle of repayment by the borrower under the terms dictated by a loan on a specific date, might be after some years.
The conditions of the loan also specify the amount of interest that the borrower must pay along on an annual basis, usually as a % of the loan given.
Interest is a measure used to make sure that the lending party is rewarded against the risk taken on one hand & on the other hand, making it easier for the borrowing party to quickly repay the loan to reduce his interest expense.

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