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. The debt may be owed by sovereign state or country, local government, company, or an individual. Commercial debt is generally subject to contractual terms regarding the amount and timing of repayments of principal and interest.[1] loans, bonds, notes, and mortgages are all types of debt. In financial accounting, debt is a type of financial transaction, as distinct from equity.
The term can also be used metaphorically to cover moral obligations and other interactions not based on a monetary value.[2] For example, in Western cultures, a person who has been helped by a second person is sometimes said to owe a “debt of gratitude” to the second person.
According to historian Paul Johnson, the lending of “food money” was commonplace in Middle Eastern civilizations as early as 5000 BC.[citation needed]
Religions like Judaism and Christianity for example, demand that debt be forgiven on a regular basis, in order to prevent systemic inequities between groups in society, or anyone becoming a specialist in holding debt and coercing repayment. An example is the Biblical Jubilee year, described in the Book of Leviticus.[19] Similarly, in Deuteronomy chapter 15 and verse 1 states that debts be forgiven after seven years.[20] This is because biblically debt is seen as both the creditor and debtor responsibility. Traditional Christian teaching holds that a lifestyle of debt should not be normative; the Emmanuel Association, a Methodist denomination in the conservative holiness movement, for example, teaches: “We are to refrain from entering into debt when we have no reasonable plan to pay. We are to be careful to meet all financial engagements promptly when due, if at all possible, remembering that we are to ‘Provide things honest in the sight of all men’ and to ‘owe no man any thing, but to love one another’ (Romans 12:17; 13:8).”[21]