How you tackle your debts may make a big difference to what you pay in the long run.

It’s not uncommon in Australia to have some form of debt, whether that be credit card debt, a personal loan, student tuition, car finance or a home loan.

The good news is, certain debt can have its advantages and generally that will come down to three things, including whether that debt has the potential to make you money, if you have good-debt management skills, and are also prepared for unexpected events.

Below we explain the difference between good debt and bad debt and share a number of ways you could improve your debt-management skills and potentially pay less in the long run.

What is good debt and bad debt?

While all debt costs money and needs to be repaid, not all debt is equal. There is ‘good debt’ and ‘bad debt’ and what separates the two is simply the ability for that debt to help you build wealth over time.

For instance, debt could be viewed favourably if you’re using it to invest in an asset, such as property or shares, which (although not guaranteed) may generate an income over time, and/or grow in value, so you can sell it for a profit at a later date.

Bad debt on the other hand is money you borrow for things that won’t see you achieve a financial gain, such as day-to-day expenses, like groceries, in addition to things like clothes and holidays.


Ways to improve your debt-management skills

Debt management skills are handy to have when it comes to managing money, saving, and planning for the future. If you’re looking for some tips, the following strategies could help you to pay off your debts sooner.

Work out what debts you have and what they total

If you’re trying to figure out how to manage your debts, a good starting point would be to make a list of how much you owe and to which providers, and how much you pay in fees and interest to each. 

While this could be a slightly unpleasant wakeup call, it will give you a clear view of exactly where you’re at, and how different interest rates and fees could affect the amount you pay back.

Compare what you earn, owe and spend

Apart from identifying exactly what you owe, it may also help to be across how much money you’ve got coming in, how much cash is required for the essentials and where the rest of your cash might be going.

This will help you identify where there may be room for movement and where you could extract a little bit extra to add to your repayments. Our Budget calculator could help you crunch the numbers.

See if you can consolidate your loans into one

Multiple debts can mean multiple fees and interest charges, which is why consolidating your debts into a single loan, with a lower interest rate and lower fees, could help you to save money.

If you roll your loans into one, it may also be easier to manage because you’ll potentially only need to make one repayment rather than having to juggle several.

However, before you make any decisions, you’ll want to look into whether your lender is licensed by ASIC and if you’ll really be saving money once you factor in interest rates, fees and any additional charges. Also, keep in mind if you don’t make your repayments on time, you may end up paying more. 

Pay your debts on time

Time management and debt-management often go hand-in-hand, as paying things when they’re due can often help you to avoid things, such as late fees and added interest charges. 

Consider setting up alerts to remind you when your payments are due or look into whether you might benefit from paying by direct debit.

Remember, late payments may also lead to black marks on your credit report, which could affect your ability to borrow money, as it reveals to lenders whether you’ve been paying your bills on time.

Try to pay the full amount outstanding rather than minimum owing

When you’re making repayments, you typically get two options - to pay the full amount that you owe, or to pay the minimum amount owing.

While it might be tempting to only pay the minimum amount owing, keep in mind that you could still incur interest on the balance that’s leftover, which means you may end up owing more money. On the flipside, if you’re able to pay the full amount, typically you won’t be charged any interest at all.

Look at whether you can afford to make extra repayments

Another idea is to make extra repayments on top of your regular repayments. This could help you pay off what you owe at a faster rate and you’ll typically pay less interest, which could mean thousands of dollars in savings, depending on how much you owe.

However, before making extra repayments, check out the conditions of your loan, as there are some lenders that might charge you for paying off your debt early.

Shop around for a better deal

High interest rates and added fees can really affect how much you pay back, on top of the original amount you borrowed.

With that in mind, it might be worth shopping around – and there are a number of comparison websites out there that could help do some of the legwork for you.

Have a back-up plan

Expecting the unexpected always goes a long way when it comes to your finances. Your loan provider could increase interest rates or change their repayment terms, or you might experience changes in employment or health, which could prevent you from working or making repayments. 

By having a contingency plan, such as an emergency savings fund, you could potentially avoid missing repayments, or accumulating more debt.

Know you can reach out

If you need help managing financially, AMP has a support hub where you can access a range of resources.

Meanwhile, we’ve formed a partnership with financial wellbeing specialist, the Good Shepherd, which is providing meaningful support to our clients, who may be experiencing hardship. If you need assistance, you can call the AMP dedicated phone number on 1300 054 500. Operating hours are 9am–5pm Sydney time. Alternatively, email the team at or visit

Budget planner calculator

What you need to know

Any advice and information is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature. It hasn’t taken your financial or personal circumstances into account.

It’s important to consider your particular circumstances and read the relevant product disclosure statement, or terms and conditions, available from AMP at, or by calling 131 267, before deciding what’s right for you.

 You can read our Financial Services Guide online for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. You can also ask us for a hardcopy. All information on this website is subject to change without notice. AWM Services is part of the AMP group.