Furthermore, the differing physical appearance/form that credit cards have from cash may cause them to be viewed as “monopoly” money vs.
real money, luring individuals to spend more money than they would if they only had cash available.
Note that the effective interest rate is not equal to the discount: if one borrows and must repay , then this is (–)/ = 10 percent interest; however, if one borrows and must repay , then this is (–)/ = 11-1/9 percent interest.
There are three main ways repayment may be structured: the entire principal balance may be due at the maturity of the loan; the entire principal balance may be amortized over the term of the loan; or the loan may partially amortized during its term, with the remaining principal due as a "balloon payment" at maturity.
Amortization structures are common in mortgages and credit cards.
Debtors of every type default on their debt from time to time, with various consequences depending on the terms of the debt and the law governing default in the relevant jurisdiction.
A company may use various kinds of debt to finance its operations as a part of its overall corporate finance strategy.
The borrower may be a sovereign state or country, local government, company, or an individual.
Besides these more formal debts, private individuals also lend informally to other people, mostly relatives or friends.
One reason for such informal debts is that many people, in particular those who are poor, have no access to affordable credit.
Common types of debt owed by individuals and households include mortgage loans, car loans, and credit card debt.
For individuals, debt is a means of using anticipated income and future purchasing power in the present before it has actually been earned.