Naughty or nice? Bad debt VS Good debt

Recent figures reported by comparison site [1] show personal debt levels in Australia are among the highest in the world. So what kind of debt can be a problem?

Not all debt is bad, yes you heard that right.

Bad debt is borrowing, that costs you money and does not improve your financial position.

Good debt is borrowing, that you can afford to repay and that helps you grow your money and build wealth.

Some debts are bad (naughty), like credit card debts or personal loans that carry high interests rates. Car debt also falls in this category, along with holidays and goods that quickly lose their value and do not make you money in the long term.

Good debt (nice), includes debts that fund assets like property or shares that have the potential to increase in value and earn income. It’s debt you can afford to pay. Investing in education to improve your career prospects and your financial position is another one of these.

It’s not news to you that you want to avoid bad debt. Our rule of thumb - if you can't afford it and you don't need it, don't buy it.

If you need help managing your debt or want to pay your debts off faster, talk to your financial adviser. We can help with budgeting and maximising your money including reducing bad debts.

Find out more - managing debt

[1] 3 Oct 2018

Disclaimer 2018: This document has been created by Wealth Market Pty Ltd (ABN 56 128 350 112, AFSL No. 482898). It provides an overview or summary only and it should not be considered a comprehensive statement on any matter. This information has been prepared without taking account of your personal objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your specific objectives, financial situation and needs.