Types of Debt
There are numerous types of debt obligations. They include loans, bonds, mortgages, promissory notes, and debentures. It is very common to borrow large sums for major purchases, such as a mortgage, and pay it back with an agreed premium interest rate over time, or all at once at a later date.
Debt, inflation and the exchange rate
Debt is normally denominated in a particular monetary currency, and so changes in the valuation of that currency can change the effective size of the debt. This can happen due to inflation or deflation, so it can happen even though the borrower and the lender are using the same currency.
Effect of Debt
Debt allows people and organisations to do things that they otherwise wouldn't be able or allowed to. Commonly people in industrialised nations use it to purchase houses, cars and many other things too expensive to buy with cash on hand.
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