Decoding the jargons Debt mortgage and collateral

*The Chinese property developer, hit by a severe liquidity crunch, sits on a pile of debt worth US$305 billion – 2.1% of the country’s total gross domestic product (GDP).

*Debt usually refers to a sum of money borrowed by one party from another. The debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

*A collateral is an asset that a lender of loan accepts as security for the money lent. This may take the form of real estate or other kinds of assets, depending on the purpose of the loan. The collateral acts as a guarantee of repayment for the lender.

*A mortgage is a loan that's used to finance property – home, land, or other types of real estate. The property, for which the loan has been taken, acts as a collateral in this case.

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