What is Debt?

Debt is a sum of money borrowed for a period of time needed to be given back with interest, or more money than the original amount you borrowed. In short, debt is money that is owed or due. 

Secured Debt/Unsecured Debt: 

The best way to understand secured and unsecured debt is the board game called Monopoly. You know that feeling when you land on a player's property, and you realize that have no money to pay them. OUCH. Wait... but you still have your properties! You end up selling or mortgaging your property to get the money to pay the player. Whew... you dodged that bullet. This is secured debt. Having collateral, or security, to repay debt. Unsecured debt is like when you lack this option, and you end up having nothing to pay the player, which is when you lose the game. 

Revolving Debt:

This is debt owed on something such as a credit card, and changes accordingly depending on how much money people continue to borrow and how much money they pay back. We will be talking more about credit in this lesson.

Installment Debt

This is a loan repaid by the borrower through regular installments (sums of money). For this type of debt, you borrowed a set amount of money that cannot be increased after you choose how much you want. One cannot keep borrowing money to pay off this type of debt. Finally, there is almost a due date for when you must pay off this debt. Installment debt comprises of mortgages, auto loans, student loans, and personal loans. 

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