ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The interest rate is the cost of debt for the borrower and the rate of return for the lender. The money to be repaid is usually more than the borrowed amount since lenders require compensation for the loss of use of the money during the loan period.

Detailed explanation-2: -Unpaid bills and written contracts or agreements to make expenditures are considered debts. Regularly recurring administrative expenses such as rent, utilities and salaries are not considered to be debts until they are past due.

Detailed explanation-3: -Interest effects the overall price you pay after your loan is completely paid off. For example, if you borrow $100 with a 5% interest rate, you will pay $105 dollars back to the lender you borrowed from. The lender will make $5 in profit.

Detailed explanation-4: -Debt is something, usually money, owed by one party to another. Debt is used by many individuals and companies to make large purchases that they could not afford under other circumstances. Unless a debt is forgiven by the lender, it must be paid back, typically with added interest.