Debt is money you borrow and repay over time, usually with interest. It isn’t always a bad thing - when managed well, borrowing can help you build a positive credit history and show lenders that you can handle money responsibly.
Common types of debt
• Unsecured debt – borrowing that isn’t tied to any asset, such as credit cards, personal loans, or mobile contracts.
• Secured debt – borrowing backed by something you own, such as a house (mortgage) or car (finance). If you don’t repay, the lender can take back that item.
• Short-term debt – borrowing that’s repaid within a year, such as some Buy Now, Pay Later or catalogue accounts.
• Long-term debt – borrowing over several years, such as mortgages, car finance, or consolidation loans.
Credit vs debt: what’s the difference?
Not all credit becomes debt. If you use a credit card for your weekly shop and repay it in full the next month, you’ve used credit - but you haven’t taken on debt. Debt begins when you borrow money you don’t already have and plan to repay it over time — for example, through a car loan, mortgage, or an ongoing card balance.
Healthy borrowing habits
• Borrow within your means and only for things you can realistically repay.
• Pay on time - setting up Direct Debits can help you stay consistent.
• Keep balances low and avoid maxing out your limits.
• Plan ahead for larger borrowing, such as a car or home, to make sure repayments fit comfortably within your budget.
The bottom line
Used wisely, credit can be a valuable tool. It helps show lenders that you’re reliable, organised, and capable of managing borrowing responsibly - all key factors that strengthen your financial profile over time.