INDIANAPOLIS (WISH) — Debt. It’s a word that makes many people nervous, but financial experts say not all debt is created equal. In fact, when used correctly, some debt can actually be a tool to help achieve your financial goals.

Adam Young, area manager with Everwise Credit Union and a friend of Daybreak, stopped by to explain the difference between “good” and “bad” debt—and how you can manage it to your advantage.

“There’s good debt and bad debt, but I like to say there’s better debt,” Young said. “At the end of the day, debt is borrowing money to pay it back with interest. Not all debt is equal.”

Young pointed to mortgages as an example of “better” debt. Home loans typically come with lower interest rates and long repayment terms, and more importantly, they help build equity as the value of your home increases over time.

“You’re meeting a need—housing—and buying something that appreciates over time,” Young said. “That house will most likely go up in value as long as it’s maintained, and as you pay down the debt, you build equity. That’s something you can leverage in the future.”

But what about the other types of debt consumers often face? Young said loans like credit cards or personal loans—which aren’t tied to an appreciating asset—should be considered more cautiously.

“I would put those in the bad debt category unless you’re paying them off every month,” Young explained. “Credit cards come with much higher interest rates and don’t give you anything tangible to sell in the future. That’s why they don’t help you build wealth the same way a mortgage might.”

For those juggling multiple types of debt, Young offered a few key tips for managing them. He suggested prioritizing paying off high-interest debt first, like credit cards, and consolidating loans when possible to simplify payments. “Consolidating your debt into one lump sum with just one or two payments a month typically works best for most people,” Young said.

When considering new debt, it’s essential to understand how it will fit into your overall cash flow. “You’ve got to know where you are to know where you’re going,” Young said. “If you can’t factor a new payment into your monthly budget, it’s likely not the right time to take on more debt.”

Young also recommended setting up automatic payments to ensure bills are paid on time, which can improve your credit score over time.

For more debt management tips, click here.