What is Debt? Learn in a simple manner from us!

1. What is it?
Simply Speaking
#SimplySpeaking Lesson 3

2. Simply Speaking,
It is money that someone lends you for business/personal
purposes on the condition that you pay them back after a
certain period with the applicable Interest.

3. Kinds of debts

4. Debts that are owed by a person as a
result of purchasing goods that are
consumable and/or do not appreciate.
These goods are purchased for a personal,
family, or household purpose.
E.g. Credit cards, automobile/housing
loans, education loan
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5. Loans that are owed by a person or a financial
institution to a business group as result of
business expenses like, inventory, business
property, physical assets, etc
For e.g. If my company borrows Rs.10 lakh
from you on the condition of paying you back
after 1 year
@ 8% p.a. my company’s debt is Rs.10 lakh
& you will be paid Rs.10.8 Lakh after 1 year

6. For Example, Consider a company with a Capital of Rs. 15 Lakh,
Owner’s Money
Bank Loans
Debt = Rs. 10 Lakh
Owner’s Equity = Rs. 5 Lakh
Borrowed Money
Rs. 10 Lakh
Rs. 5 Lakh

7. The total amount of money that the
government owes to creditors. The
government's creditors include all
individuals, businesses, governments and
other organizations that own government
debt securities.
E.g. A country incurs debt in order to
finance R & D in science, technology &
armaments. Also, to finance the subsidies
and public utilities given to the public.

8. What is India’s National Debt?
Click Here to Find out!

9. Debt Investment Avenues
Lower Your Risk & Get Good Returns!!
• Debt Mutual Funds – Investment in a mix of debt or fixed income securities
such as Treasury Bills, Government Securities, Corporate Bonds and other debt
securities. Generally, they have a fixed maturity date & pay a fixed rate of interest
• Bonds - A debt investment in which an investor loans money to an entity
(corporate or governmental) that borrows the funds for a defined period of time at a
fixed interest rate
• Corporate Fixed Deposits – It is the deposit placed by investors with
companies for a fixed term carrying a prescribed rate of interest.
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