Friday, December 12, 2008

What is Debt?

It might seem like a simple subject to some but I've heard a few different opinions on what exactly debt is. I've known some people that only count certain types of payments as debt, saying, for instance, that an auto loan is debt but a mortgage isn't. I know that some people only count "good debt" as debt. Good debt is supposedly debt that makes you money, such as debt on a rental property.

Merriam-Webster dictionary defines debt as "something owed: Obligation; a state of owing". I find this interesting as I usually think of debt as money owed to one another. Debt can really be anything we owe to someone else. In fact, according to the Bible, the only thing we should owe each other is a debt of love (Romans 13:8) but that's a subject for another post.

So, by this definition, any type of loan would be a debt. I can see how some people might say "good debt" is better than "bad debt" but I would still count each as debt.

I think that also means credit cards, auto loans, student loans, other consumer loans (deals like 6 months same as cash), and mortgages. Mortgages would count as debt since you have a house but you owe the bank money for that house.

I've always wondered if bills would count as debt too. I think that they would since you owe the provider of whatever services bills you. For instance, I know I would count medical bills and bills from my college for tuition as debt. I'd be interested to here what you think. Do you think bills count as debt?


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