Difference Between Debt & Liabilities

[disneysteve]

Debt has responsibilities. If you don't maintain them people won't lend to you. And you also could lose the item due to nonpayment. That's all I meant.

That's certainly true.

I just don't agree that my paid for car is a liability because I need to pay an annual registration fee or that my paid for house is a liability because I have to pay taxes on it.

I have to pay taxes on my income, too, but I certainly don't consider it a liability to get a check every 2 weeks.

[jeremym51]

Debt is always in the form of money, whereas liability is anything that costs money to a business or an individual. For example if a company purchases a loan from a bank then the company needs to return the loan with interest for a specific time. However, if the company purchases raw material from a supplier then it is a liability for the company that it needs to pay back to the supplier maybe in 30 days.

[~bs]

it depends on your definition of debt, which differs to everyone.

If your definition is intended to mean all obligations, anything owed to someone else, then it equates to all liabilities

if your definition is meant to encompass only formal written financial agreeements like bonds and loans payables, then it does not equate to all liabilities.

[bjl584]

This can get into hair splitting.

I'd say, in the most basic terms that we can lump things as follows:

"Good" debt would be debt that you take on in hopes that it will one day turn into an asset for you. A mortgage, student loans, a business loan.

"Bad" debt would be debt that is frivolous and serves no long term goal. Credit card debt, car loans that are way too high for one's income.

Expenses would be the cost of being alive. Food, utility bills, clothing, repairs and maintenance on houses, cars, equipment.

[colby99]

The basic idea is the same, in that in both cases something is owed. Practically speaking, though, a debt is usually defined as a type of liability where you specially take out a loan, whereas a liability is any sort of future payment due.

[TexasHusker]

I do get amused when someone shouts for joy that they paid off their $1500 a month mortgage, when in fact they still have to pay half that amount for taxes and insurance.

As long as you're alive, you are going to owe someone, and quite possibly after you're 💀.