What Is Debt?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Debt is any money borrowed from a 3rd party that has to be paid back. Companies will typically use debt either as a cheap means of funding, or to fund purchases would otherwise be unaffordable to them.

Usually, debt is repaid over a specific time period with a pre-determined rate of interest being paid on the debt. The repayments of the lump sum are called principal and the interest payments are just called interest.

Often, debt has to be backed by some form of asset (known as collateral), for example the house itself backs a mortgage. Debt can be issued in many forms with the most common being bonds, mortgages or cash loans.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.