SYMBIOSIS INTERNATIONAL DEEMED UNIVERSITY

Submitted by
Rithvik Gundavarapu
Name: G. Rithvik
PRN:21010324138
Division: D
BBA LLB (2021-2026)

In December 2021
Under the guidance of

Sitamber Swamy

Accountancy Professor
Table of Contents
Chapterization Pg No.

Introduction 3
1. What is a debt?
2. Interpretation of Debt

Types of Debt 4

Types of Debt 5
Avoid Growth of Debt

Avoid growth of Debt 6

References 7
 Avoiding Growth of Debt

1. What is a Debt?

Debt is a type of financial transaction where one person is required to pay to another, also

known as borrowing money from one party to another, Generally as an outcome of a loan or

other monetary transaction. A debtor is a person who borrows an amount from the creditor

and has to pay at a later date, along with interest. It can be owed by any individual,

government, company, country.

1.1. Interpretation of Debt

Mortgage loans, income taxes, personal loans, car loans are some of the well-known types of

Debt an individual owes. A Debt can be either short term or long term. Companies' use of

their equity and Debt may include a word such as bonds or loans. Banks play a crucial role in

providing loans to individuals, borrowers, or companies regulated by the Reserve Bank of

India. There are certain types of loans, which includes personal loans, Home loan, student

loans which are combined are combined with credit card debt.
 Types of Debt

There are four categories of Debt:

1. Revolving Debt
2. secured Debt
3. Unsecured Debt
4. Instalment Debt

Revolving Debt:

A Revolving Debt is an amount where a borrower can charge or pay down debts repeatedly,
having no predetermined limit or boundary. In other Sense, A borrower will have no
interruption from borrowing funds. If the account is active and the borrower qualifies to fulfil
the Lender's obligation, we can set the maximum amount in our account. The unpaid balance
will be charged to the next bills with interest added.

Secured Debt:
Sometimes to reduce the risk of the creditors, secured debts will be used. Secured debts are
somewhat like a Collateralized Debt where the creditors will take the debtor's collateral, also
known as an asset. If the debtor fails to repay the loan, then the creditor can rightfully obtain
the collateral. The collateral can be houses, cars, building properties, investments, where it is
equal enough to cover the amount of the Debt.
Unsecured Debt:
In an Unsecured Debt, collateral is not required at all. The Lender determines whether to
accept or deny lending based on your credit reports—for example, student loans, personal
loans. Based on the debtor's earnings, The creditor will give the loan to him.

Instalment Debt:
Instalment Debt means a loan will be repaid in a fixed period. The payments are frequently
made monthly in equal instalments. It is quite the opposite of revolving Debt. It can be for a
long term for up to 30 years. It may also negatively affect the companies financial position.

Avoiding Growth of Debt:

Combined Loans:
Avoid taking more than no. of loans as it helps lower your interest rates, and Debt will be
cleared quickly. This loan includes everything from Personal loans, Student loans, credit card
balances. The primary purpose is for the consumers who want to reduce the amount owed on
loan by making limited payments towards the Debt. Track expenses can be loosed unless the
combined loan is set up.
Asking Lender for Lower Interest rates:

We can use the Lender who offers interest at a low rate. In case if we cannot avoid
borrowing. It depends on your credit score, and if you're a customer who has been doing this
for an extended period, then demanding a lower interest rate may be worth a try. If the
interest rate is reduced, many amounts can be saved in a year. The best way is to clear off our
debts every 30 days to avoid interest charges permanently.

Avoiding Debt:
Often we overspend and live beyond our means when we cannot pay for that particular item.
Many consumers have this habit of charging items when they cannot pay with cash. It is
always better not to use your credit card for cash advances, as you will likely be charged a fee
and will cause a higher interest rate on the particular transaction amount. Even if the amount
is fully paid in the month, Consumer still has to pay interest on borrowed cash. It's always
better to use coupons for groceries when it comes to your budget. The extra money will be
inaccessible. It is better to save up to 6 months salary for emergencies. You will also be able
to cover your expenses whenever you are in urgent need of cash. It is better to spend less on
unnecessary wants, For example, going to a restaurant or online purchasing items. The more
we reduce spending on our needs, the better our finances will be.
 References
1. https://www.capitalone.com/learn-grow/money-management/types-of-debt/
2. https://www.centralbank.net/learning-center/strategies-to-avoid-debt/
3. https://www.zoho.com/blog/books/5-ways-to-deal-with-your-small-business-debt.
4. https://www.investopedia.com/terms/d/debt.asp