Good Debt Vs. Bad Debt – Where Should You Be Borrowing Money?

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borrow-more-moneyThe word “debt” conjures up a very negative connotation. However, did you know that there is such a thing as “good” debt? While it is admirable for those who can avoid all kinds of debt or credit, most of us manage to have some by our early adulthood years. Home ownership, university loans, car loan providers, like Latitude Finance, and credit cards are a few of the most common types of debt.

When you need to secure some extra funds, don’t panic and take some time to explore all of the options available to you. With the right kind of financing, you can move one step closer to securing whatever it is that you want to purchase. Whether it’s a new vehicle, the home of your dreams or paying for your education, there are plenty of choices available to help you out.

Continue reading to learn about some of the options available and which kinds of debt are better than others.

Credit Card Debt

Credit cards are an amazing modern invention. For those who use theirs sparingly or for gaining points but then pay it off each month, it is a great tool. Unfortunately, most credit card users can find themselves in trouble when they start to spend more than their earnings.

Australians owe a total of about $32 billion on credit cards, which works out at an average of $4,160 for each card holder. This is across all income levels, so even the higher earners are carrying a balance. Some credit cards offer a very low introductory rate, but then usually the rate goes up to as high as 20% or more. Credit card debt should be the first debt to pay off.

Car Loan

Depending on the amount of money you need to borrow and your credit rating, a low interest rate may be possible. If you rely on a car for work, then taking out a loan makes a lot of sense as it is an investment in your career.

Save up for a decent down payment if possible and then your monthly payments won’t be as high. Shop around for the best rate and don’t be rushed into a purchase by an eager salesperson. Be wary of lease schemes that offer incentives for driving the latest model. Read the fine print as it may not be the best option as you must either return the car after the 3 years or make a balloon payment.

Student Debt

Many students must take out a loan to help pay for their higher education. In Australia, debt from student loans and in particular HELP (Higher Education Loan Program) loans account for 2.1% of Australian household debt.

Fortunately, student loans are at a lower interest rate than other types. Investing in your future with a university degree and higher wage potential is very important for many young people, so a student loan is a type of “good” debt.


Many people believe in the importance of owning a home and choose to start on the property ladder whenever they possibly can. Home loan debt is an investment and a type of “good” debt as well. Most homes appreciate in value, especially with good upkeep and a stable economy. Some loans are fixed rate, while others fluctuate with the market.

Choose the Right Kind of Financing for Your Needs

Owning a home, a car, and having a university degree are important aspirations for many of us. These types of dreams are made a reality with access to the many different financing and loan options available on the market today.

Good debt helps you with some type of investment in your future. Steer clear of too much credit card debt and high interest rates which will just drag you down. With the right kind of financing behind you, you can move towards a fuller future.


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