Jim has a home loan and a car loan. He defaults on his home loan after a year of making payments on time. However, he continues to make all of his car payments on time. Will his actions make his home debt a good or bad debt? Why?

Select the best answer from the choices provided.

A. Jim's debt becomes a good debt since it is backed by collateral.

B. Jim's debt becomes a bad debt since he cannot make payments.

C. Jim's debt becomes a bad debt since it is not backed by collateral.

D. Jim's debt becomes a good debt since he is making payments on his car.

Question

Jordyn Cortez

Business

2 April, 08:33

Jim has a home loan and a car loan. He defaults on his home loan after a year of making payments on time. However, he continues to make all of his car payments on time. Will his actions make his home debt a good or bad debt? Why?

Select the best answer from the choices provided.

A. Jim's debt becomes a good debt since it is backed by collateral.

B. Jim's debt becomes a bad debt since he cannot make payments.

C. Jim's debt becomes a bad debt since it is not backed by collateral.

D. Jim's debt becomes a good debt since he is making payments on his car.

+3

Answers (1)

Know the Answer?

Jonathan Houston · Answer 1

When you default on a loan, you are not making payments on that loan anymore. Defaulting is used to describe a negative action that is happening due to the sudden stop of payment on a loan. In this case, when Jim stops making payments on his loans they have a negative impact on his credit score. The answer to the question is B. Jim's debt becomes a bad debt since he cannot make payments. Although Jim is making his car payments which is good he is not making his house payments which are required.