Debt used to build wealth or improve financial position?

• A. Bad debt
• B. Investing
• C. Good debt
• D. Property investment

Answer: (C)

Debt used to build wealth or improve financial position is best described as good debt. The idea is borrowing to acquire assets or opportunities that generate income or appreciate in value, such as a mortgage for a home that may rise in price, a loan to start or grow a business, or student loans to gain skills that boost future earnings. The crucial point is that the expected return from the investment should help exceed the borrowing costs, improving your net worth over time.

Bad debt, by contrast, funds consumption or depreciating assets with little or no future financial benefit, which harms finances. Investing is an activity, not a debt category, and property investment is a specific example of using debt to acquire an asset, but the broader term that covers debt used to improve finances is good debt.