What constitutes consumer debt?

Consumer debt refers to the amount of money that individuals owe to creditors for personal expenses, often related to purchases made on credit that are not backed by collateral. This includes credit card debt, personal loans, and similar financial obligations where the debt is incurred for the consumption of goods and services rather than investment in physical assets.

When considering the chosen answer, it accurately defines the nature of consumer debt as it emphasizes the aspect of purchases that are not secured by an asset. This means that the debt is a result of consumer spending, and if the debt is defaulted on, creditors do not have a specific asset they can reclaim.

In contrast, other forms of debt such as mortgages or secured loans are tied to an asset—like a house or a car—which the lender can claim if the borrower fails to repay the loan. Therefore, they do not fall into the definition of consumer debt as it is commonly understood. Similarly, debt owed for services rendered, although it could lead to consumer liabilities, is not the typical definition of consumer debt focused on purchases.