Definition

• Outstanding debt basically means unpaid debt. If you owe a bank, another financial institution or some other creditor money, then you have outstanding debt. All monies owed count toward your total outstanding debt. This includes both the principal balance and any interest or fees that have been added to it, according to BusinessDictionary.com.
  
  

Function

• Outstanding debt is a byproduct of the loan vehicles that allow consumers to purchase things now and pay for them over time. Outstanding debt is necessary for most people who want to buy a home or any other big purchase, as it is difficult to pay cash for these items.
  
  

Types

• Outstanding debt can take many forms, including mortgages or home equity loans, auto, motorcycle or boat loans, credit card debt, and personal loans or lines of credit from the bank. If the form of loan is a line of credit, then the amount that is counted as outstanding debt is only the money that has been spent against the line of credit.
  
  

Significance

• If paid on a regular basis and utilized properly, outstanding debt does not have to be a bad thing. For example, although someone might have $250,000 in outstanding debt in the form of a mortgage, he also has a home for himself and his family. However, too much outstanding debt can lead to credit-crushers such as bankruptcy, foreclosure and collection accounts.
  
  

Warning

• It is important for a person to know how much outstanding debt she can handle and to not go overboard with her purchases. Doing so will help avoid negative effects from her outstanding debt.