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1) Voluntary and compulsory (On the basis of legal enhancement): Voluntary debt is the debt which is paid any legal enforcement. Whereas compulsory debt is legally forced in nature. Here people have no option but repay the debt.
2) Funded and unfunded debt (Provision for repayment):
Funded debt is long term or ‘definite period’ debt. A proper agreement and terms and conditions of repayment with the percentage of interest payable are declared. They are used for creation of permanent assets.
Unfunded debt is for a short term and for indefinite period. It is paid through the income received from other sources. These are used for meeting current needs.
3) Internal and external debt: When the government raises revenue by borrowing from within the country, it is call internal debt. Whereas if the government is borrowing from the rest of the world, it is case of external debt.
4) Productive and Unproductive(Purpose of loans): Loans on Projects yielding income (Construction of plants, railways, power schemes liked) are called productive debt. Loans on loan non income yielding projects are called unproductive loans (war, famine relief etc.)
5) Redeemable and Irredeemable loans (Promise to repay): Redeemable debts refers to the loan which the government promises to pay off at some future date. (principal plus interest) Irredeemable debts are those, principal amount of which are never returned by the government but pays interest regularly.
6) Short / Medium/ Long term loans (Time duration): Short term loans are usually incurred for a period varying from three months to one year. Usually governments get such loans from the central bank by using treasury bills. These loans are calls ‘ways and means advances.’
Medium Term loans are those which are obtain for more than one year but less than ten years.
Long term loans are those which are obtain for more than ten years. These are used to finance developmental activities.
Judiesiz answered the question on July 10, 2018 at 06:58
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