A debt is an amount of money borrowed by one party (the borrower) from another (the lender) on the condition that it’s paid back at a later date, usually with interest (what the lender charges for borrowing the money).
Debt can be in the form of home loans, personal loans, car loans, student loans, hire purchase, credit cards, store cards, buy now- pay later schemes and more.
Some debts may have the potential to improve your future prospects by increasing how much money you might be able to earn (like a student loan for tertiary study), or by increasing your assets (like a home loan to buy a house).
But debts can become a trap and get out of control – like when you spend more than you earn or borrow to buy non-essentials or things that quickly lose their value (like those trainers you just can’t live without).
It’s important that if you’re borrowing money, you’re aware of your responsibilities – like the interest rate, term of the loan (how long you have it for), fees, repayment amounts and the total cost of borrowing (the original amount plus interest and fees). This should all be provided to you by the lender. If you’re not sure about anything, don’t be afraid to ask questions – there’s no such thing as a silly question when it comes to understanding debt.