Credit vs. Debt

The terms credit and debt are closely related in the world of finance but refer to different aspects of borrowing and lending:

Credit
- Definition: Credit refers to the ability to borrow money or access goods and services with the agreement to pay later.
- Perspective: It focuses on *potential* borrowing or a person's reputation for repaying borrowed money (creditworthiness).
- Examples:
  - A credit card lets you access a line of credit up to a certain limit.
  - A bank offering you a loan or pre-approving you for one.
- Key Concept: Credit is a promise or opportunity to borrow.

Debt
- Definition: Debt refers to money that has already been borrowed and needs to be repaid.
- Perspective: It is the actual obligation or liability resulting from using credit.
- Examples:
  - The amount you owe on a loan, mortgage, or credit card balance.
  - Borrowing $5,000 from a lender is your debt until it is repaid.
- Key Concept: Debt is the result of using credit.

In summary:
- Credit is about the capacity or permission to borrow.
- Debt is the financial obligation that arises when credit is used.