What are the main types of consumer debt?

The identification of the main types of consumer debt encompasses more than just a single category or a narrow range of financial obligations. The correct response highlights three distinct classifications: revolving debt, installment loans, and open accounts.

Revolving debt refers to credit that allows consumers to borrow up to a certain limit and pay it back over time, typically seen in credit card accounts. This type of debt is characterized by its flexibility, allowing borrowers to use credit repeatedly as long as they stay within their limits and make timely payments.

Installment loans involve borrowing a fixed amount of money that is repaid over a set period through regular payments. This category includes personal loans, auto loans, and mortgages, which have clear repayment structures and specific terms.

Open accounts are a less common form of debt that typically refers to accounts with a balance that can fluctuate. An example of this type of debt is a charge account, where the borrower is expected to pay the balance in full each month.

In contrast, the other options mentioned do not capture the full scope of consumer debt. For example, focusing solely on credit card debt overlooks other significant forms of consumer obligations. Limiting the discussion to personal loans and mortgages disregards other types of debts that consumers may incur. Finally, debt arising from