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Debt Limit

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A debt limit is the maximum amount of debt which a government is allowed take on. A governmental debt limit may be changed -- either up or down -- through legislative or voter action. A debt limit is sometimes referred to a debt ceiling. While a debt limit is often used to refer to the maximum borrowing power of a state, local or national government, debt limit can also refer to the maximum borrowing power of an individual in regards to a specific credit card or other line of credit. While the voters or a legislative body determines a government's maximum debt limit, a bank or other lending institution sets the debt limit for an individual as regards to that particular lender. Often there is a penalty for a governmental body or for an individual who borrows in excess of an established debt limit.



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