What is Debt?

Debt is the borrowed outstanding money [and] that must be paid back to the lender or Guarantor  according to the terms of the contract drawn between the parties of the agreement. Debt can be classified as Good Debt and Bad Debt, and in all cases, it is an obligation that must be settled in a timely manner.

Good debt vs Bad debt

Good Debt is that which brings in money during the payout period, reduces the outstanding debt, and once the debt is fully paid, the product, property or business becomes a part of the borrower’s asset. While Bad Debt costs the borrower more and must be paid from out of pocket. In the end, the unpaid accumulated debt costs more to carry and can become a financial burden to the borrower. Therefore, the borrower may decide to get rid of the purpose for which the money was borrowed in the first place.  Bad Debt becomes a liability, reduces the accumulated wealth of the borrower, thus reducing what goes to the beneficiaries while Good Debt becomes an asset that increases the wealth and impacts the estate positively.