A major difference between debt and equity is that principal and interest payments on debt are fixed contractual commitments.

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Debt involves borrowing money that must be repaid over time, with interest. The amounts and timing of these payments are typically fixed and agreed upon in advance, making them contractual obligations. Equity, on the other hand, does not involve fixed repayments; instead, it represents ownership in a company, with returns dependent on the company's performance.

A Major Difference Between Debt and Equity Is That Principal