TYPES OF DEBT
The term ‘debt’ refers to amount that is owed. It can be understood as an arrangement which allows the borrower to borrow a certain amount that is to be paid back after a defined period of time to the lender. There are different types of debt as mentioned below:
The debt that is secured by an asset as collateral. It means that the lender can use the collateral in case of any default.
The unsecured debt, as the name suggests, refers to the debt that is not backed by any security. Such a debt has to claimed by approaching the court in case of a default.
In this type of debt, there is an agreement between the lender and consumer which enables the lender to borrow a certain amount on a recurring basis.
The short-term debt, also known as current liabilities of a company, firm etc., is a debt that is to be paid within one year is called a short-term debt.
The debt that can be paid beyond a period of one year is known as a long-term debt.
