Pay down bad debt, focus on good debt

Many Australians are at breaking point with their repayments on their debts. However many more are dealing with rising interest rates easily because they made provisions for the higher repayments, or never lowered their repayments when interest rates were falling. Experts warn that some debts should be avoided, while some debts ultimately increase wealth.

Bad debt that needs to be repaid as fast as possible is debt that is incurred to buy things that depreciate in value, such as a holiday, a car, or shopping debt on a credit card. Credit card debt often attracts 20 per cent in interest charges, compared to a personal loan from a credit union which charges about 9 – 11 per cent. Other debts, such as a mortgage to buy a house, or a loan to make an investment ultimately can increase wealth because the assets may rise in value.

Source: The Australian