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What is Debt?

In personal finance, debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. There is “good” debt and “bad” debt. An example of good debt is a mortgage on a rental property, because the debt is for an asset that produces income for you. An example of bad debt is buying Givenchy slides with your credit card when you don’t even have the money to pay for them.