Debt is an economic term that denotes assets owed. Debt is created whenever a creditor agrees to lend money to a debtor with the expectation of repayment. There exist different types of debt based on their specifics. The main types of debt are public and private, secured and unsecured, and syndicated and bilateral.

Secured debt is a form of debt whereby the creditor may claim rights over the private property of the debtor before advancing claims over his or her company. On the other hand, unsecured debts are financial obligations wherein the creditors cannot use the assets of the borrower in satisfaction of their claims. While private debt is a loan obligation, public debt refers to an array of financial instruments that are employed to trade on the public exchanges, subject to some restrictions. Syndicated debt refers to a loan that allows businesses to borrow additional money by getting assets from several banks that can each secure a portion of the principal sum .

Debt allows bodies to do things that they normally would not be able to do due to a shortage of funding available. Debt is also used as leverage by companies that plan to invest. The debt to equity proportion helps assess the risks that are involved in making a particular investment.

The ratio of the debt to equity is obtained when debt is divided by equity. It is used to evaluate the company's ability to pay back the obligations it has incurred.. Basically, a high ratio suggests to creditors that the business depends on credit rather than on a positive cash flow for its operations. In the cases of both, companies and individuals, such a situation means that there is a risk of defaulting, or failing to repay debt, due to events such as income loss.

Debt by default involves repayment to the creditor at a later date. Those who have incurred plenty of debt can resort to debt consolidation. This instrument allows for a single loan that can be used to repay obligations to all or several of the creditors at the same time. The debtor is left with a single outstanding debt that is due to the company that agreed to grant the loan. Debt consolidation is a preferred option because all debts are lumped together and the interest rate on the new loan may be lower than the one paid at present. However, the total debt still exists and should be paid off to the debt consolidation company.

In the case that the debtor is unable to pay for his or her obligations when they become due, bankruptcy may be one of the likely scenarios. Debts are normally discharged one year after bankruptcy was declared. Although the debtor is freed from his financial obligations, some restrictions apply. The remaining assets will also be fairly distributed among the creditors. The debtor will no longer be in charge of assets, apart from those used for household purposes such as beddings and furniture.

A specific type of debt is public or government debt, also known as national debt. Such obligations are owed by the authorities at different types of governance, such as federal, central, municipal, and local government. Because the authorities collect their income from the citizens, their debts are an indirect form of debt paid by the taxpayers. Government debt is of two kinds: external and internal, with the first payable to foreign lenders. National authorities usually borrow with the help of government bonds, securities, and bills they issue. States that are considered less creditworthy may need to borrow from institutions at the supranational level.

Before getting into debt, make sure you check the debt guide, brought to you by financial dictionary.