Definition of Outstanding Debt

According to the Business Dictionary, outstanding debt is the "unpaid portion of a debt that may include interest accrued on the balance." In other words, outstanding debt includes all of the money a person owes. In addition to the amounts borrowed, outstanding debt also includes the interest that is charged on the debt on a daily basis.

Types

Because outstanding debt includes money owed to all sources from which it was borrowed, people carry many different types of outstanding debt. One of the most common ones is credit card debt, as anybody who uses a credit card has at least a small amount of outstanding debt. Even if the card is paid in full every month, the debt is outstanding during the part of the month before it is paid. Other types of outstanding debt include auto loans, student loans, mortgages and home equity lines of credit.

Principal Balance

The principal balance is the main portion of an outstanding debt. Once all the payments a person has made on a loan have been applied to paying interest charges and repaying the money borrowed, the principal balance is the amount of the money borrowed that still remains to be repaid. For example, if a person has a $200,000 mortgage on a home, after five years of payments the principal balance may be down to just $183,350.

Interest Owed

Interest is typically charged on a daily basis, so if any days have elapsed since making the last payment on a debt, then a person also must include some amount of interest owed when calculating the amount of outstanding debt. For example, say a person has carried a balance of $3,500 on a credit card at 14 percent annual interest. Divide 14 percent by 360 to calculate that 0.039 percent interest is charged every day. If it has been 20 days since making the last payment, then the interest owed is $3,500 times 0.039 percent times 20, or $27.22. Therefore, the person's outstanding debt on the credit card is actually $3,527.22.

Paying Off Debt

When paying off outstanding debt, people should consider how much of their monthly payments are going toward interest and how much is decreasing the principal balance. Especially during the first few payments on a loan, a large portion of the monthly payment will cover interest, and the principal balance will hardly decrease at all. Making extra payments that go directly toward the principal balance greatly decreases the amount of interest paid over the life of the loan. Paying off debt quickly also reduces the total outstanding debt and can help you get better interest rates on new loans.

Federal Debt

Another major type of outstanding debt that does not fall within the category of personal debt is the outstanding debt of the federal government. Many people know this as the "national debt." This amount is the total of all the money the government has borrowed but has not yet repaid, both to its citizens and to foreign governments. The Bureau of Public Debt within the Department of the Treasury manages the treasury bills, notes and bonds that make up the federal debt.