ShmoopTube

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finance a la shmoop.. what is debt..well debt happens anytime you or anyone else

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or anything else borrows money and promises to pay it back countries borrow [Hands out looking to borrow cash]

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money from their citizens and from other countries

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Granny borrows money from the equity in her house to pay for her full body skin [Granny getting a full body skin procedure]

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lift procedure, ew! you'll probably borrow money to go to college buy a car

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and buy a home credit cards are golden or plastic

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tickets that let you easily borrow relatively small amounts of money to you

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know buy stuff so there are tons of types of debt and to really understand [lots of examples of debt]

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it all you have to think about debt from both sides of the equation that is you

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as the borrower want the most flexible payback terms the cheapest interest

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rates to rent that money and the least amount of grief if you're ever late on a

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payment but what if you're the lender well you only have so much money to lend [woman walking and approaches a vault of cash]

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and you want to maximize your returns while being smart about risk that is if

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you loan 10 grand to 10 people and 9 of them pay you a fat 10% a year but one of [woman at a stand giving loans to people]

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them absconds with your money to Brazil with senorita maracas well then

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all your work was for nothing more or less when the interest just paid back

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the lost principal on the one who absconded and yeah one bad loan can wipe

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out the returns of your entire portfolio your billion bucks was supposed to produce [Man falls in water while surfboarding]

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a hundred million in interest gains but when one of the ten hundred million

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dollar investments died and well you ended up sitting on a billion and that's

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it so no jet for you so would you loan money to your slacker friend Flaky McGee [Flaky McGee and Bill Gates together]

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for the same rent as you lend to Bill Gates while Flaky McGee has a history of

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you know flaking hence the name. so you'd have to take the risk of him [Flaky McGee in the kitchen with his Mom]

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not paying you and you'd have to track him down in Rio or get lawyers to take

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possession of the skateboard collateral he pledged for the loan and then sell it [Lawyers taking Flaky McGee's skateboard as collateral]

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on eBay and hopefully get most of your money back

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we'll go on record saying that you'll likely charge Flaky McGee a lot more in

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interest and make the terms and conditions much more brutal than you [Terms and conditions for Flaky's loan]

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would for dear old Bill well one big thing people don't seem to understand is

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that debt is just about someone renting money debt does not involve ownership of

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anything other than the promissory paper that contractually outlines the debt

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terms the only time debt does involve ownership is when the piece of paper has [Flaky sat on a toilet]

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been well you know made into toilet paper because the debtor flaked and

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didn't pay back the loan that they promised to pay at that point the one

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who loaned the money usually has every right to take back the collateral [Man drives car away from Flaky]

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pledged behind the debt and if that collateral can't be found to break knees

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you know the guys with the baseball bat remember? you ever see The Sopranos well so [Flaky screaming while on the toilet]

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if you ever find yourself in that position make sure to you know hide your

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knees

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