Australians are applying for loans in record numbers. Some will take on more credit card debt. Others will borrow to buy a property. Which path will you choose?

Retailer Gerry Harvey says we are headed for the best Christmas season ever. That might sound like a big call, but figures show that since July there has been a double-digit rise in applications for loans and credit cards. The economy is on the mend and people are far more comfortable with their circumstances than they were earlier in the year.

RateCity reported a huge 84 per cent rise in applications for loans and credit cards since September. And with the strong growth in the property market, the number of people shopping around for a home loan increased by 47 per cent in the September quarter*.

It sure feels like we are back on the ‘Prosperity Path’, but there is a T-junction up ahead. The left turn is the ‘Bad Road’, where goods that depreciate in value – like clothes, cars and electronics – get charged to credit cards with high interest rates. The right turn is the ‘Good Road’, where smart investors borrow to buy investment property that grows in value and where the interest costs are paid by renters and are tax-deductible.

Unfortunately, most people will make a left turn and borrow money to buy things they want now but don’t really need and pay for them for years to come, even as the goods lose their value and appeal. The reason for this is that this road is so easy and accessible, and the urge to travel it is very strong. The flood of daily advertising on all the latest fashions and gizmos is designed to separate you from your money, and having done that, to encourage you to borrow more and do it all over again.

With the current affordability of property, a few hundred dollars a month could be enough to enable people to buy an investment property that grows in value, rather than spending it on a credit card plan.

Smart investors know this, and make small sacrifices in the short term, to enjoy the benefit of long-term asset growth. And when the time does come for spending, they can do so with confidence, and with cash if they choose, because their assets have grown through the sound choices they made along the way.

So, we’re not here to spoil your Christmas, or to put a dampener on your shopping. All we want to do is let you know that there is a smart alternative to spending. It’s called investment property. And it’s far easier than you might think. How’s that for a real Christmas treat!

*Reference: Eoin Blackwell, Daily Mercury, “Aussies 'looking to spend cash'” 16 October, 2009