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Most Australians are taught to avoid debt.
But not all debt works the same way.
Understanding the difference between good debt and bad debt can change how you approach property investing and how you build long-term wealth.
For years, being “debt-free” has been positioned as the goal.
No loans. No repayments. No risk.
That mindset makes sense when debt is used for:
These forms of debt reduce cash flow and rarely contribute to long-term financial progress.
The issue is not the advice itself.
It’s applying that same thinking to all types of debt.
As a result, many people avoid borrowing altogether — and rely solely on income and savings to get ahead.
Not all debt carries the same outcome.
The difference comes down to what the debt is used for — and what it enables over time.
Bad debt is typically used to fund consumption.
It is linked to assets or expenses that:
Common examples include:
This type of debt reduces your financial capacity over time.
For most people, reducing bad debt is a priority.
Good debt is used to acquire assets that may:
In property investing, this often means using a loan to purchase an investment property.
When aligned with a broader strategy, that asset may:
Good debt is not about borrowing more.
It’s about borrowing with purpose, structure and a long-term plan.
When all debt is treated the same, the natural response is to eliminate it as quickly as possible.
While this can reduce financial pressure in the short term, it may also limit long-term progress.
Relying on income alone is often a slower way to build wealth.
Savings are important, but without assets working alongside you, growth can be incremental.
Understanding the role of good debt in property investing allows you to think differently about how wealth is built.
Property investors use debt to access assets sooner, rather than waiting years to save the full purchase price.
Instead of needing the full value in cash, they:
This allows them to control a larger asset earlier — and participate in any potential growth across the full value of the property.
Over time:
That equity can then contribute toward future purchases, which is how portfolios are gradually built.
If you want to understand how this works in practice, you can explore DPN’s research and strategy approach.
Bad debt funds lifestyle. Good debt, used well, can support long-term wealth.
Debt alone does not create wealth.
It needs to be supported by:
Lenders assess your ability to service a loan, which is why understanding your position is critical before taking action.
Working with a specialist can help you understand your borrowing capacity and structure your lending appropriately.
In a portfolio strategy, debt is not viewed in isolation.
It is part of a broader system that includes:
Used this way, debt becomes a tool within a structured investment plan, not just a liability.
Avoiding bad debt is a smart financial decision.
Avoiding all debt without understanding how it works can limit your ability to build wealth.
In property investing, debt is not simply something to eliminate.
Used with the right strategy, it becomes a tool that helps you move forward.
The information provided is general in nature, it does not take your personal objectives, circumstances or needs into account. It is not specific advice and is not intended to be passed on or relied upon. Any indicative information and assumptions used may change without notice, particularly if based on past performance. Interest rates are subject to change. Finance approval is subject to terms and conditions and meeting lender approval criteria.
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