Debt
In short
Not all debt is equal. Clear the most expensive first (usually credit cards, payday loans and buy-now-pay-later), keep paying the minimum on everything, and get free help early if repayments are slipping. Struggling with debt is common and there is genuinely helpful, free support in Australia.
The National Debt Helpline on 1800 007 007 connects you with free, independent financial counsellors. They are not a lender and do not sell anything. You can also ask any lender for a hardship arrangement - by law they must consider it.
Know what your debt costs
The interest rate tells you how urgent a debt is. Roughly, from most to least expensive:
| Debt type | Typical cost | Priority |
|---|---|---|
| Payday / small-amount loans | Very high fees | Clear urgently |
| Credit cards | High interest | Clear early |
| Buy now, pay later | No interest but fees, and easy to overuse | Keep small |
| Personal / car loans | Moderate interest | Steady repayment |
| Home loan (mortgage) | Lower interest | Long-term |
| Study loan (HELP) | Indexed to inflation, no interest | Lowest - see below |
Two proven ways to pay it down
Avalanche (cheapest)
Pay minimums on everything, then put every spare dollar on the highest interest-rate debt. Mathematically the cheapest - you pay the least interest overall.
Snowball (most motivating)
Pay minimums on everything, then attack the smallest balance first. Costs slightly more, but the quick wins keep many people going.
Either works. The best method is the one you will stick to. Model your own timeline with the debt payoff calculator.
Should I save or repay debt first?
Usually: keep a small emergency buffer ($1,000-$2,000), then throw everything at high-interest debt, because clearing a 20% credit card is a guaranteed 20% return - far more than any savings account pays. Once expensive debt is gone, build the full emergency fund and start investing.
Study loans (HELP/HECS) are different
HELP debt has no interest. Instead the balance is indexed once a year (1 June) to the lower of inflation (CPI) or wage growth - the 1 June 2026 indexation was 2.8%. Repayments are compulsory only once your income passes the threshold, and are taken through the tax system. Because it is so cheap, it is usually the last debt to pay off voluntarily - clear expensive debt and build savings first. See the tax page for the 2026-27 repayment thresholds.
Be very cautious with payday lenders, \u201cdebt agreements\u201d and \u201ccredit repair\u201d companies that charge fees. A free financial counsellor can often achieve the same result at no cost. If a deal sounds urgent or too good, slow down and check it.
If it feels hopeless
Serious debt has real, legal options - hardship arrangements, and in some cases formal debt solutions. These have consequences, so get free advice first from the National Debt Helpline before signing anything. You have more rights than you might think, and debt stress is treatable, not permanent.
Sources for this page
Every figure below was checked against the official source shown. Verified 20 July 2026. Figures and rules change - always confirm before acting.
- National Debt Helpline - Free financial counselling. ndh.org.au - 1800 007 007, free
- ASIC - Moneysmart - Managing debt and paying it off. moneysmart.gov.au/managing-debt - independent guidance
- Department of Education - HELP indexation and debt reduction. education.gov.au - 1 June 2026 indexation 2.8%
Verified 20 July 2026