how debt works
the most common forms of debt are loans including mortgages auto loans and personal loans as well as credit cards under the terms of a most loans the borrower receives a set amount of money which they must repay in full by a certain date which may be months or years in the future the terms of the loan will also stipulate the amount of interest that the borrower is required to pay expressed as a percentage of the loan amount interest compensates the lender for taking on the risk of the loan credit cards and lines of credit operate a little differently they provide what s known as revolving or open end credit with no fixed end date the borrower is assigned a credit limit and they can use their credit card or credit line repeatedly as long as they don t exceed that limit 