Many South Africans sink into debt almost as soon as they enter the working world. But if you know what you’re getting into, you won’t be caught out by these myths.

Myth: All debt is bad
Truth: There is something like good debt. This is debt that helps you pay for an asset, like a house or an education. Most people can’t afford to make big purchases – such as a car or a house – without a bank loan.

If you are just starting out, chances are you won’t have R80 000 to drop on a second-hand car. Student loans are the same story: the lifelong benefits of a university education outstrip the cost, in most cases, anyway!

Bad debt is non-durable items such as clothes, food and electronics. Don’t pay for this using credit, as it adds no future value.

Myth: No one knows what you owe, as it’s confidential
Truth: Think again. Even future employers can have access to your credit rating. Your credit rating tells potential lenders how trustworthy you are when it comes to borrowing money. Cellphone companies and clothing stores may not issue you with an account if you don’t have a credit rating. So, if your bank offers you a credit card after you get your first job, accept it, but use it wisely.

Myth: It doesn’t matter what debt you pay off first
Truth: Pay off the expensive debt first. Credit cards typically have a very high rate of interest, often much higher than car or student loans. Pump any extra cash into your credit card and eliminate that debt first, before interest chows up all your credit.