Warning
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Warning
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Simple English definitions for legal terms
leverage
Read a random definition: guiltless
A quick definition of leverage:
Definition: Leverage is when someone borrows money to buy something that costs more than they have. This is often done when buying a house or investing in something. It can be risky because if the investment doesn't do well, the person could lose a lot of money. If someone has borrowed too much money and doesn't have enough to pay it back, they could go bankrupt.
A more thorough explanation:
Leverage is when someone borrows money to buy something, like a house or a business. It's a risky strategy because if the investment doesn't do well, the borrower could lose a lot of money.
For example, if someone borrows money to buy a house and the housing market goes down, they might owe more money than the house is worth. This is called being "underwater" on the mortgage.
Another example is a company that borrows a lot of money to expand their business. If the business doesn't do well, they might not be able to pay back the loans and could go bankrupt.
These examples show how leverage can be a high risk, high reward strategy. It can lead to big profits if the investment does well, but it can also lead to big losses if it doesn't.