"Getting into debt is far easier than getting out of it. If you shop around and manage your loans, they won't make a mess of your finances."
When you should borrow?
Look at the total cost including all the interest before you borrow. Only borrow if you are sure you can afford the repayments.
For things you just Want, such as holiday, it's cheaper to save up for them. Even for things you may Need, such as a smart phone, it cheaper to save if you can.
If you do borrow, pick the shortest repayment period you can afford, especially for anything that you use up quickly, like a holiday, or that loses value, like a smart phone.
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For a home, almost everyone has to borrow because it's hardly realistic to save up for one. In this case, it can make good sens to borrow, because a home could increase in value, perhaps even faster than the interest rate you will pay.
How much should you borrow?
It pays to be cautions. Lenders or mortgage brokers may offer you a bigger loan than you would feel comfortable with.
Interest rates could go up, and if you borrow to much even a small rise could get you into trouble.
Could you afford to do that for the full term of the loan,maybe for 20 or 25 years?
Tip: Do a trail run before you borrow. Try saving an amount equal to your repayments each month, or saving the difference between your rent and home loan repayments.
Source: ASIC