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What would consider ad being in debt?

26 replies

LardLizard · 13/08/2018 09:27

Surely anyone with a mortgage is in debt

OP posts:
YouCantStopTheSignal · 13/08/2018 09:32

Personally I think of someone as "being in debt" when their repayments become unmanageable, unpaid, or are taking up the majority of their income with a detrimental effect on their day to day life (e.g., no money left for even small treats like a magazine).

AvocadosBeforeMortgages · 13/08/2018 09:42

I tend to think of being in debt as covering loans that have been taken out to cover spending that comes around regularly (eg shopping, Christmas, holidays) or would otherwise normally be covered by wages / savings. It's particularly but not exclusively the case if the debts are unmanageable.

I don't think of the big ticket investment type loans - mortgages, student loans - as being "in debt", though of course they technically are.

BarbaraofSevillle · 13/08/2018 09:54

Technically a mortgage is a debt, but seeing as very few people could afford to buy a house without one, and you would have to pay rent anyway, which could cost more than a mortgage, it's debt that's worth having. It also buys an asset, so could also be seen as an investment.

Same for student loans, which should really be thought of as a graduate tax, as you only pay them off if you earn an above average salary and if you stop earning, or only earn a low salary, no repayments are due. Something like 80%+ of people taking out student loans won't have to pay them all back and the majority will only pay a small amount.

Agree with avocadoes that a sign of being in debt is using credit to pay for normal spending, as that's the classic definition of living above your means. Ideally, a person should be able to pay for all their basic expenditure, both regular monthly outgoings and the irregular/unexpected from their income without borrowing and be able to save to cover any gaps in income such as illness or redundancy.

TryingToHelpMustTryHarder · 13/08/2018 09:55

Agree, using credit cards and loans to get by.

Camomila · 13/08/2018 10:04

Mortgages and student loans - ok
Loans or credit cards - 'in debt'

I'm the kind of person that doesn't even like being £20 overdrawn at the end of the month, can't imagine getting a loan for a holiday - i'd be so stressed thinking about paying it back!

SnuggyBuggy · 13/08/2018 10:12

My DF raised me to believe that the only "acceptable" debts are your mortgage and student loan and everything else should be saved up for so I guess that's my view.

AvocadosBeforeMortgages · 13/08/2018 10:17

DGF always used to tell me that it was only acceptable to take out a loan for a mortgage and a stove Grin

sleepsleepandmoresleep · 13/08/2018 10:28

I think that a mortgage and student loan are 'acceptable' debts, but still to be cleared ASAP.

Using credit to finance your life otherwise is not ok debt, IMHO. I have a credit card that all of my monthly spending goes on so that I get cash back/points etc but it's cleared in full every month without fail. I would also potentially put an expensive purchase on an interest free credit card and pay it off over several months rather than take the money out of savings for example (because although saving earn very little, they still earn) but only because it doesn't cost me anything. I wouldn't do this if I didn't have the money in savings to clear it immediately if I needed to.

If you can't afford to pay for it, don't buy it.

There was a lot of irresponsible lending that went on in years gone by, but having worked in the industry and seen it with my own eyes I can also without any doubt confirm that there was an awful lot of irresponsible borrowing too!

twiglet · 13/08/2018 10:39

I consider in debt to be having to either regularly rely on credit cards/overdraft to get by or using a large portion of your income (after rent/mortgage) to try to pay things off.

Technically student loans and mortgages count but if you're not struggling then it's just another payment.
I use my credit cards to pay for things online as they offer better protection and use them to keep my credit score for when we need to do big things like switch mortgages.

SnuggyBuggy · 13/08/2018 10:40

Also not all mortgages are created equal. A 50% mortgage taken at 30 is very different to a 95% mortgage at 60.

Penisbeakerismyfavethread · 13/08/2018 10:50

sleep - “if you can’t afford to pay for it don’t buy it”
There are things like rent and food and travel to work that people cannot afford to pay for. What should they do?
If you’re less affluent you’re less likely to be able to access interest free CC’s or CC’s at all.
When DH and his XW split about seven years ago she stayed in their mortgaged house as she had DC’s from her first marriage- and DH lost a lot of money (no grudge) but H moved into a bedsit. As a self employed tradesperson the Lettings agency wanted him to pay 6 moths rent up front as we’ll as nearly a grand fees. He had no money and a poor credit rating so took out a £7000 payday loan to move pay the 6 months rent and buy a fridge a washer and MOT his car etc. In March when I sorted out us getting a joint mortgage I found out that despite paying £200 a month every month since January 2012 there was still nearly £4000 owing due to interest
(Now all on my interest free CC with only 4 months to go!)
Debts easy to get stuck in!

sleepsleepandmoresleep · 13/08/2018 12:24

@Penisbeakerismyfavethread if you are in a situation where you can't afford rent/food/travel to work then borrowing money isn't the answer! What's going to happen? You're going to end up mired in debt that you can't repay, and end up either on a DM plan/IVA, being taken to court or made bankrupt etc etc etc. Then you're in an even worse situation that you started in.

It's massively shit that people are in those situations, truly, but toxic borrowing has to stop - in the same was that toxic lending has had to (mostly) stop.

PolkerrisBeach · 13/08/2018 12:32

If you can't afford to pay for it, don't buy it.

This is a ridiculously simplistic attitude which infers that all debt is a BAD THING. Which it isn't.

We're buying a new kitchen. All in, it's costing between £20k and £25k. The kitchen company is offering us 0%, interest free credit. So rather than paying the full whack immediately, we can pay 10% deposit then the rest spread over 5 years.

Why wouldn't you take a deal like that? We can easily cover the monthly payments, it's costing no more overall, and yes it means we get our kitchen now rather than in two or three years time when we've saved up all the money in cash.

Obviously things like pay day loans and running up a huge credit card bill are never a good idea. But having the mindset that all debt/credit is bad, scary and awful is just stupid.

sleepsleepandmoresleep · 13/08/2018 12:35

@PolkerrisBeach I would say unless you have the means to pay something like that off if you were to lose your job/become ill and unable to work etc then yes, it is daft. I'd take advantage of an interest free offer like that definitely, but not unless I had the cash behind me to clear the debt in the result of a change of circumstances.

SnuggyBuggy · 13/08/2018 13:00

The fact that people need to go into debt for bog standard living costs shows how crap the job and housing markets are right now.

LoisWilkerson1 · 13/08/2018 13:02

Anything other than mortgage, car and student loans.

PolkerrisBeach · 13/08/2018 13:04

Snuggy - why would you need to be able to stump up the entire amount immediately on an interest free credit deal? You just need to be able to keep making the monthly payments, whether that be £50 or £500 or anything in between.

Want2bSupermum · 13/08/2018 13:09

polkerris That 0% loan won't be truely 0% because the interest cost is rolled into the cost of the kitchen renovation. Get another quote without the financing. It will be at least 5-10% lower, possibly more.

DownUdderer · 13/08/2018 13:11

Interest free credit deals often have ‘hidden’ fees

sleepsleepandmoresleep · 13/08/2018 13:12

Because @PolkerrisBeach what if you (god forbid) become ill and are unable to work anymore? You aren't going to be able to keep up the monthly payments for long are you? Lose your job and are unable to find another one or have to take a big pay cut? Same thing.

It's a very short term view - oh I just need to make monthly payments. That's fine, if you can definitely make those payments for the entire term of the borrowing. I would want to know that I had the sum required to clear the debt sat in savings (earning a little bit of interest) should I need to clear the debt at any time or at least a decent income protection policy before taking out such a substantial loan.

If I didn't have those I'd go back to what I said before. I can't afford it right now, so I can't have it!

DownUdderer · 13/08/2018 13:12

The kitchen renovation isn’t exactly gaining in value over the period you’re paying it off either

beingthere · 13/08/2018 13:14

When what you owe is more than your assets. A mortgage is a loan for an investment, if it is worth more than the amount you owe, you are not in debt in the same sense as someone who owes money on credit cards but does not have assets to cover...

SnuggyBuggy · 13/08/2018 13:19

You could lose your job or find yourself having another expense in that time. I'm a bit of a pessimist.

I actually remember as a teen me, DF and DSiS wanted to buy this box set and the only way to pay for some reason was in installments, my DF found it very traumatic Grin and made us promise to set aside our third in reserve until it was paid off.

BrokenWing · 13/08/2018 13:33

Everyone views debt differently with varying degrees of adversity to risk and this will also change as you become older and your financial situation changes. To me debt (other than mortgage) is anything that you don't pay off in the month it was incurred.

If I think back to my first flat we were paying up 2 cars, mortgage, credit cards weren't being cleared each month, home improvements, store cards, white goods etc. The amount we were spending paying for finance was ridiculous and we were naively and blissfully unaware if either of us had lost our jobs or couldn't bring in a wage we would have been in crisis.

I am in my late 40's now (just!) and wouldn't, for example, take out finance for a kitchen. I avoid debt now, when we buy a new (to us) car we start savings for the next one instead of buying first and paying up, we have savings now for the bathroom to be done. But we can with a bit of planning and effort afford to do it this way, which means we have the luxury of not having to pay expensive debt costs (agree with pp who said 0% finance is an incentive marketing tool and the costs are hidden in your price)

Problem debt isn't when you get to the point where you cant pay, its when you don't have a contingency plan/insurance for when something happens and you can no longer keep up with repayments.

Want2bSupermum · 13/08/2018 16:38

I see any monies owed to others as debt. That includes our mortgage. None of my friends view their mortgage as debt because it's become so normalized to buy a home with debt not cash. 30+ years ago a lot of people were buying their home with cash because getting a mortgage was very difficult and the bank wouldn't lend much. This meant house prices were lower.

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