Good Debt vs. Bad Debt: What Every Healthcare Worker in Australia Needs to Know

Healthcare Home Loans
19 hours ago
3 min read

Updated: 4 hours ago

graphic Good Debt vs. Bad Debt: What Every Healthcare Worker in Australia Needs to Know

Debt can either work for you - building wealth, freeing up cash flow, and unlocking opportunity or quietly erode your financial security. Knowing the difference between good debt and bad debt is essential for healthcare professionals who want to make smart, stress-free money decisions, especially in the lead-up to EOFY.

Below, we break down each debt type, explain what it is, how to spot the difference between good and bad versions, and how to get the most from it.

🏡 Home Loans

What it is: A mortgage used to purchase your primary residence or investment property.

Good Debt: A mortgage on your own home with competitive interest, ideally benefiting from LMI waivers or special healthcare lending packages.
Bad Debt: Over-leveraging or buying beyond your means with poor equity or a high-risk interest rate.

💡 Tip: Use your healthcare professional status to negotiate better lending terms - including larger loans with smaller deposits.

🏘️ Investment Loans

What it is: Finance used to acquire income-generating assets like investment properties or shares.

Good Debt: Positively geared properties or capital-growth investments with a strong return on investment.
Bad Debt: Highly speculative or negatively geared assets without a strategy can strain your finances.

💡 Tip: Focus on investments that either produce cash flow or are part of a clear long-term growth plan - and review the tax implications annually.

🎓 Student Loans (HELP/HECS)

What it is: Government-supported education debt that is repaid through your income.

Good Debt: HELP debt is indexed (not interest-bearing), low-pressure, and helps increase your earning capacity.
Bad Debt: Letting it sit unmanaged can affect your borrowing capacity when applying for home loans.

💡 Tip: When planning to borrow, factor HELP debt into your serviceability - especially if your income is rising.

🚗 Car Loans

What it is: Finance used to purchase a vehicle, either for personal or business use.

Good Debt: Used for work-related travel or business, with potential tax deductions and business benefits.
Bad Debt: Personal-use car loans with high interest on a depreciating asset.

💡 Tip: Consider novated leasing or business-purpose finance options to make your car loan more tax-efficient.

💳 Credit Cards

What it is: Revolving credit facility for short-term purchases.

Good Debt: Paid in full monthly to avoid interest, potentially earning rewards points or cash back.
Bad Debt: Carrying a balance month-to-month with high interest and fees.

💡 Tip: Set up automatic full monthly repayments to avoid interest entirely and improve your credit score.

💰 Personal Loans

What it is: Unsecured loans for personal expenses like weddings, renovations, or emergencies.

Good Debt: Used for necessary, high-return activities like medical treatment or business startup costs.
Bad Debt: Funding non-essential lifestyle spending (e.g., holidays, new tech).

💡 Tip: Always ask: “Will this loan generate a return - or just add interest to my lifestyle?”

🩺 Business Loans

What it is: Finance used to fund or grow a business or private practice.

Good Debt: Structured with a clear ROI - used to expand a clinic, purchase equipment, or invest in operations.
Bad Debt: Borrowing without a financial plan or a clear path to profitability.

💡 Tip: Work with an accountant or broker to forecast your business return before borrowing - especially if scaling a side hustle or telehealth offering.