Debt is a word that, unfortunately, many of us are familiar with. But, do we know precisely what it means. Debt is something that is owed to someone else. It can refer to assets, moral obligations and of course the one we all know well, money.
Debt can be used as a means of purchasing assets when you do not have the funds to cover it at the present time. There are many companies and corporations that use debt as a financial tool or strategy to make money.
When a creditor agrees to lend money or assets to someone – a debtor then a debt has been created. In this day and age, we think of debt as being tied to repayment in the form of money. This is usually the agreement between the creditor and the debtor. However, this has not always been the case. In the past, indentured servants repaid their debt through work or labor to their employer or creditor, more specifically. Their employer provided a contract and there would be a certain time period that the work or labor was expected and at the end of the period the debt was repaid.
There are different kinds of debt. For example, a company may use various kinds to fund its operations. It may choose to use secured or unsecured debt, private or public debt and or syndicated and bilateral debt.
The origin of the word comes from the French language – dette. And, from that it came from Latin – debere which means to owe.