Good Debt, Bad Debt and the Grey Area No One Explains

No one really teaches you how debt works before you’re suddenly expected to manage it. One day you’re graduating from school, the next you’re being offered credit cards, personal loans, and a future mortgage, all with very little explanation of what’s helpful and what’s harmful.

Understanding the difference early can quietly shape your entire financial future.

The Two Faces of Debt

People often talk about good debt and bad debt, but the reality is more nuanced.

Good debt is usually linked to building something long-term, like education, skills, or assets. Bad debt often funds short-term spending that loses value quickly and comes with high interest.

Most real-world borrowing sits somewhere in between.

HECS & HELP: An Investment in Your Future

HECS-HELP allows you to study now and repay later, once your income reaches a certain level. There’s no interest, but the balance is indexed over time.

It’s commonly viewed as a supportive form of debt because it can improve career opportunities. At the same time, it still affects future pay and borrowing capacity, which makes understanding it just as important as signing up for it.

Credit Cards & Personal Loans: Flexible but Costly

Credit cards and personal loans are often easy to access, which makes them tempting.

Used carefully, credit cards can help manage cash flow. Used without a plan, they can become some of the most expensive debt available.

Personal loans can sometimes support consolidation or essential purchases, but they can also fund lifestyle spending that fades quickly while repayments continue.

Mortgages: Debt That Builds Assets

Home loans are usually considered a different category of debt because they’re linked to buying property (an asset that may grow in value over time).

An owner-occupied mortgage supports housing stability, while an investment loan is connected to building wealth through property or shares. Both involve long timeframes, large balances, and ongoing commitments.

They’re often described as “productive debt,” but they still require careful understanding of repayments, interest, and long-term impact.

The Real Skill: Conscious Borrowing

Debt itself isn’t the problem. The real skill is borrowing with awareness.

Understanding why you’re borrowing, how long it lasts, and what it costs can change the way debt shapes your future.

Because financial confidence doesn’t come from avoiding debt completely, it comes from knowing how it really works.