In today’s time, people’s hobbies and needs have increased so much that they need a loan or can say that debt, although debt and loan are quite similar, still, there is some special difference between these two about which If you do not know about it and you want to know the information related to it, then this article is for you because in this article we are going to know about all the information related to debt like how many types of debt are there. And to know what are its advantages and disadvantages etc., then definitely read the article till the end.

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What is Debt?

Debt is a loan that you take from someone or give it to someone. This English word is read as date, in which B remains silent. A person gives money on Debt so that he can earn money from it on the basis of interest. Passive Income Keeps coming. A person or a bank gives debt to someone in two ways, the goodwill of the debt taker is seen, otherwise no one Mortgage Keeping is given. it’s a normal process Business, Individual, Banks, Company etc. Gives a debt or even takes a date when needed.

In business, one of his company gives debt to another company, so that business buys more goods from him because he has to pay later. A middle ground between the giver and the taker of debt agreement sign It happens in which the person taking the debt will return that money after a certain time, that too along with the interest, how much interest will be charged, these two parties together decide. big big Corporate or Government Debt to take your Bonds In this, they deposit money from people, in return they get a fixed interest.

like United States of Govt. If he needs money then he will issue his Treasury Bonds in the market and people sitting all over the world can buy it and people buy them because US Govt. one of Goodwill They know that their money is not going to sink anywhere. Similarly, corporates also bring their bonds in the market and people buy them. Debt is one type of loans like – Home loan, Auto loan, Business and personal loan etc. Debtor giving loan to the person taking the loan has to make repayment of the loan at a fixed time, Monthly or Yearly interest has to be paid along with the loan, the lesser the loan is for the time, the higher the interest is.

The credit card is also on the side of a debt, which is your credit by that company. (Credit Score) But it is given to you that if you make all the payments on time, then your credit score increases and your card limit also increases. If you do not make the payment on time, your credit score falls further, it becomes difficult for you to get the loan.

How many types of Debt are there?

Debt is like this, but four types of Debt are given on the main basis, let’s see them one by one.

  1. Secured Debt :- To take this type of Debt, that person has to keep some collateral. Collateral The price should be as much as that of that Debt because if he is unable to pay the Debt, then it can be auctioned or sold and the money can be recovered. For Collateral, house, car, gold etc. are kept. Before giving the debt, the employment history of that person is seen that how much his income is, he will be able to return its payment or not, the documents are verified, it is a long process. Most of the people take this Debt for student and home loan.
  2. Unsecured Debt :- These Debt are given to the person taking Debt without any Collateral. it’s his reputation (Creditworthiness) In this, their profile is seen, what is the history of their repayment, how much is their income. What is the credit score of that person. Because it is not collateral in any way, so the risk is also high in it. A good example of this is a credit card, in this you get a credit limit, if you meet that limit, then you get to see the new limit only after repayment.
  3. Mortgage :- Those people who want to get their house constructed or take student debt, they have to do some kind of work for this. Mortgage Keeps. The time period of this type of debt is 15-20 years and they are given to the people at very low interest.
  4. Corporate :- These corporates need big debt, so they issue their company’s bonds in the market and promise repayment and a fixed interest every year. Bondholder Will continue to get it till his money is not returned to them. Any of these Bonds Individual or Business Can buy and then he is called Bondholder. Money is returned on time.

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Advantages of Debt

  1. When money is needed, a fixed interest money is available which can be repaid in installments.
  2. If the credit limit is used properly then it can be useful in your future.

Disadvantages of Debt

  1. If the loan is not repaid, the mortgage is auctioned.
  2. Due to excessive debt, the company also becomes bankrupt.
  3. Unsecured debt is difficult to get, documents are verified.

Final Words

Debt should be taken only when needed and that too as much as we can return. Secured debt should be taken less because there is no payment back but that item can be auctioned. You should increase your creditworthiness and take only unsecured debt. let’s hope What is Debt? And what are these types and if you do business then there should be information about this term and if you have any question then give information about it in the comment.

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