Debt is money owed to another party and can include mortgage, rent, an automobile loan and even tuition. A person is considered in debt after making a promise to repay.
Any time a person owes debt to another party, he is considered indebted to that party. In this scenario, the person promises to make periodic payments that account for all the money previously borrowed. A person typically struggles with deciding when to take on debt. In most cases, it is important to conduct a cost-benefit analysis to determine if taking on the debt now can prove beneficial at a later time.
The Federal Trade Commission lists various types of debt, such as credit card debt and mortgage. While these are some of the basic types of debt, there are additional reasons a person may seek a financing arrangement. For instance, a small business loan is considered a type of debt. In addition a person may take on a loan from a retirement account. No matter the type of debt, most obligations have specific payments terms that are only pertinent to that financial instrument.
The amount of debt a person takes on should depend on how much they can pay back. A person with more debt than he can handle should consider realistic budgeting, debt-relief services, debt consolidation or bankruptcy.