Does it pay for itself or build something?
Some borrowing buys something that keeps its value or raises your income: a home you would otherwise rent, a course that leads to better-paid work, a tool you need for your job.
Other borrowing pays for something that is used up quickly, like a holiday or a new phone before the old one has stopped working. That isn't wrong. It just means you pay extra to have it sooner, and nothing is left to repay the debt except your future income.
What does it really cost?
Look at the APR and the total amount you will repay, not only the monthly payment. A small monthly figure can hide a large total if the loan runs for a long time.
Example: you put a €1,500 holiday on credit at 20% a year and repay it over 24 months. The payment is about €76.34 a month, so you repay 76.34 × 24 = €1,832 in total – about €332 of interest. In the first month alone, interest is 1,500 × 0.20 ÷ 12 = €25.
Compare a €3,000 course loan at 6% over 24 months: about €132.96 a month and €191 of interest in total. Twice the amount borrowed, but well under the interest on the holiday.
Can you still pay if things go wrong?
A loan is a promise about your future income. Ask what happens if you lose your job, fall ill or face a big repair: could you still make every payment for a few months?
Debt that only works if everything goes to plan is risky, even when it is for something useful. A home loan whose payment takes up too much of your pay can cause more stress than a small card balance.
If the answer is no, borrow less, save first, or build an emergency fund before you take it on.
Putting it together
Borrowing that builds something, costs little and stays affordable in a bad month is usually manageable. Borrowing that buys something short-lived, at a high rate, with no room for surprises is the kind to avoid or pay off first.
Most debts sit somewhere in between, and the three questions show you where. If you already owe on several things, avalanche vs snowball explains which to clear first.