Debt is simply something owed by one person (the debtor) to another. However, it is most commonly associated with the obligation we accept to repay the lender both the original sum we borrowed (called the “principle”) and also any interest or other charges set out in the loan agreement.

It is incredibly easy to acquire debt - indeed, the banks (and other non-bank lenders) seem to be “falling over themselves” to lend us money.

Selecting Your Lending Product

Like most people you may not have the time or the expertise to ensure you get the debt that is best suited to your needs. It is much more convenient and less confusing to simply accept the first option offered to you - one which is often linked to the purchase itself. Thus, you may be repaying a series of debts, all of which have different terms, conditions, fees and interest charges and repayment dates.

The table below captures the most common forms of debt and lending products:

Purchase	Type of Debt	Interest Rate	Term
Own home	Mortgage	6% +	Normally 20-30 years
Car	Personal loan	9% +	Normally 1-5 years
Smaller household purchases	Credit card/Store cards	12% - 30%	Ongoing, but normally requiring a minimum payment of 5% of credit balance.
Telstra, CBA or other share purchases	Personal or margin loan	9% +	Dependent on terms and conditions of actual loan. Can be set repayment of principal and interest, over set term, or interest repayment only.

* Interest rates, terms and conditions, and fees charged vary markedly between lending organisations.

What began as the easiest option at the time, can quickly become a very confusing maze of multiple monthly repayments, due on different days, to different institutions.

It can also become very expensive, as each one of these debts will usually have an associated series of start-up costs and ongoing account-keeping or maintenance fees and charges. Government fees in the form of stamp duty, are often levied as well on each new borrowing. Interest is not the only cost we pay on debt products.

When you purchase an asset, you normally do so with the purpose of accumulating wealth either through appreciation (growth) or income (dividends etc). Yet, while trying to make your hard-earned dollars work that little bit harder for you, you may face often unnecessary fees, charges and higher interest on debt products that don't really suit your individual needs.

The Importance of Regular Reviews

Debt management is a process whereby you actively manage and review what you owe, to ensure that you are not paying any more than you need to, when purchasing assets. While reviewing your portfolios is considered to be an essential part of the asset accumulation process, so too should be the regular evaluation of your debts and liabilities.

In essence, it is essential to not only carefully select the lending solution at the outset, but to also regularly review whether the long-term lending product you committed to, is still the right choice for you.