Shop around for the best debt deal.

There'll come a time in your life when you're faced with deciding whether to borrow money. You may be a student needing some funds to complete your degree or perhaps you're considering buying a car or a home.

In our Step-by-Step guide to Debt Management, you'll learn that debt isn't necessarily a bad thing – as long as you stay in control of your borrowings.

Having made the decision to borrow, where do you go – the bank you've been with for a few years, a local credit union, a finance house like GE Money, a mortgage broker, or even that quick-approval lender advertising on late-night TV? These days the list of lenders seems endless.

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The purpose of your borrowing will be one factor in determining where you turn, as will how long it'll take to pay back the money – your credit card might be the no-fuss way to buy something you can afford to pay off in a month or two, especially if you have a card with a low interest rate.

The key is to shop around – interest rates and loan fees can vary widely, so sniff out the best deal. But make sure you stick with reputable lenders, and check your loan contract carefully.

Non-conforming lenders
Apart from the mainstream lenders, an alternative source of funds is the 'non-conforming lender'. These finance providers are more willing to lend to people who may not pass the credit tests imposed by others – but at a cost.

Non-conforming lenders usually charge a higher rate of interest because of the perceived higher risk in lending to someone who might not pass muster elsewhere. This penalty could amount to thousands of dollars over the life of a loan, so think carefully before going down this path.

This type of loan is used by people who have yet to establish a solid credit rating, by those who for various reasons don't want to disclose the degree of financial detail required by other lenders, and by casual workers and small business people who don't have the sort of steady income preferred by other lenders.

One or two years of on-time loan repayments under these arrangements can help establish a good credit record.

Checklist:
When you go to a lender, have with you:

• Proof of your earnings e.g. pay slips or tax returns
• Details of existing debts, such as credit and store cards
• References, such as from a landlord.
• Proof you've paid off other debts on time.