When talking about credit card debt, the debt securities issued by such factors as the source of loan funds, the purpose of the loan, the conditions under which floated the debt, the volume of existing debt, interest rate, loan type, which are used and general economic conditions of community.
Individuals can borrow from individual investors, financial institutions and commercial banks. Effects of domestic borrowing is very different from foreign loans. An internal credit, no increase in overall funding. Rather, it is a way to allow people to make more funds in the domestic order. Bank loan is only a transfer of funds from private to government use. Individual purchases of government bonds by transferring their savings now or previously accumulated to reduce their cash holdings. So the transfer of resources from individuals and institutions do not create an expansionary effect on the economy.
Impact of debt also depends on the purpose of the loan. If loan funds are used for wasteful spending, not the support of an asset, then this loan can not be maintained. In addition, interest rates influence the borrowing costs and thus on the banking system and general economic conditions. The higher interest rates to borrow, the more the train in funds from competing investments.
A serious diversion of funds from the marginal firms tend to cause the failure of the past and this will affect production and other economic processes, such as market prices and interest rates. If financial institutions to get tax exemption for their loans, this will encourage more for the purchase of their letters.