To ask about debt?

[rosie1979]

Basically I feel like we have a lot of debt.

We have a mortgage that is probably about 175k with (hopefully) the house being worth say 240

I have about 8k on personal debt, dp probably about 12k. It feels like so much of our income goes to paying it off, switching to 0% cards all the time ect.

Is this normal to exist like this? Most of the time I dont worry about it but then I start feeling worried about never clearing it.

I have:
£6k left of a £10k loan (wedding)
£2k left of an £8k loan (professional studies loan)
approx. £6k on credit cards with a £9k limit
£3.5k on a £4k overdraft
£4.5k car loan
TOTAL = £22k (not inc. student loan of £10k)

Husband has about £11-12k personal debt.

We have no mortgage (rent).

It costs me abou £1k per month to service my debt. It's a real bummer. BUT I am earning a lot and my husband is about to have a big deal come through which should clear THE LOT.

What is more scary is to think that only 4 years ago my OH's debt was just over £3million!!!!!! Now THAT is scary.

Agree with lurker it must be fairly normal as when we bought our car with cash the garage seemed quite suprised. ad same even when we have bought things like tv and computer we were suprised at the assumption that we would be interested in a credit agreement. I took out a professional development loan to pay for a course and hated being in debt, paid it off as fast as I could, living in tiny flat and putting all my spare money into overpaying. Since then haven't ever used credit/ loan, I only buy things if we have cash available. Mortgage, within reason, is different but it does shock me how easily people will take on debt.

We only have our student loans - no mortgage and no personal debts. My student loan is about £18k. I am "paying it off" but in reality I think it accrues more every month in interest than my payments cover!

rosie,

If you put the details of your debts into the snowball calculator it will tell which to pay first, or overpay if you have the funds available. It also tells you how much interest you would pay if added to a mortgage.

snowball calculator

It is normal i think.
I dont know any one (except us) who dont survive by using credit cards.

We have a small mortgage but that was by pure luck buying the house when house prices were low (10 years ago) thats our only debt.

We dont have a credit card and i wouldnt know what to do with one as ive never had one. But they are handy i believe

I dont know any one (except us) who dont survive by using credit cards

Same here Cherrychoo and it makes me think that there is a massive difference in the way that me and DH see money, and the rest of the world!

My friends DH has a big birthday recently so they invited us and some others to a meal at a v nice and expensive restaurant. We couldn't afford it, we have had a tight couple of months and had a big bill due that week. We might have squeezed it but it would have meant cutting back somewhere else so we declined the invitation. Friend rang and asked why we werent coming and I explained and while she was fine with it (she was thinking I was ill or something to do with the pg) she said "We cant afford it either, I'll have to stick it on the credit card" with the implication that we should have done the same. She organised it, safe in the knowledge that they would have to go into further debt for it! When I suggested they have a booze up at home and we could all bring a dish she said that they didnt want to so why shouldnt they go out. ERrrr....because you cant pay for it?! But the message was loud and clear that we were being unreasonable not going into debt for a night out.

They need help most months paying their rent from either set of ILs and these are proper grown ups with kids, not just out of college no-idea-about-money people!

I think its normal to have mortgage debt. 20k of other debt depends on how much it is relative to your income. Generally other than buying assets that can appreciate in value (houses or gold) and that I have put down a significant deposit for I would never buy anything that put me in debt.

You're basically borrowing from future earnings if you buy something now but pay for it with debt. So you're living above your means now and will have to live below your means later to pay it off. For some people "later" never comes because they can't accept such a drop in standard of living so the debts just escalate.

Also money saved is certain, future earnings to pay back debt aren't. Which is why some people have such a big problem if their income drops.

On a personal note, I can't enjoy something I don't feel is mine, so we never borrow to fund expenditure. Agree that MSE is your friend.

Trying to think back through my debt history now...

I also went through uni towards the end of the grant era, but it wasn't enough so I topped up with student loans. DH (at the time) had help from his parents through uni so had no student loan debt. We started off in our early twenties with a 95% mortgage on a 2 bed semi, had to take out loans for 2 cars and also to buy things for the house. I cannot remember exactly now but the total of the loans must have been well over £25K at their height + the mortgage (only about £50K though). For our ages we had a relatively high income but didn't really live like it at all. Rarely went out/never went on holiday. It was all about paying off the debt. By our late twenties/early thirties we had no debt other than mortgage debt. House prices had started to rise and we moved to a larger home (released some capital from the rise by still having a pretty high mortgage % to do it up a bit). We were very lucky because the house value then rose by £70K in less than a year. We then split up and sold it.

I later moved into my current DH's home that he bought before the rapid house price increase - we extended it several times but still the mortgage is only about 35% of its total value. We live well within our means - probably have a lifestyle that we could maintain on half the income. DH still does some things that I consider a little odd - like taking out a loan for a car when he has investments that could pay it off. He thinks that his investments should be able to completely clear the mortgage and any debt in about 3 years though. We are in our late thirties/early forties.

We are completely aware of how lucky we have been with houseprice rises etc (i.e. buying houses before they became ridiculously expensive) but also worry about our children. I doubt whether we will suddenly start living more comfortably in 3 years - it will all be able saving for our children's future. Just to allow them to do things like buy a family home by the time they are thirty (like we did with no family help), on relatively normal incomes without getting massively into debt.

Wow, I had no idea this level of debt was normal now, but it certainly does explain why so many people seem to have so much 'more' than we do when we have such high salaries.

Personally, I wouldn't be able to sleep at night with that level of personal debt.

The mortgage is one thing but just random debt?

"borrowing from future earnings" i never looked it this way, i just looked at as using money that isnt your own and that in many cases that cannot be payed back.

I am an old fashioned girl, if i dont have the money in my pocket then i go without until i have saved up for it. Or i do without something else to pay for it.

I get that people pay bills/rent/mortgage when really stuck but when people look at the debt and have no idea what it has been spent on i suppose i just dont get it.

Having said that, i think its me that is the odd one out and that it is the norm to have debt.
Not judging btw, its something ive often thought when friends tell me about their debt.
One friend drives a huge 4x4 that costs a fortune each month, her dh also has a big posh car and they are always crying poverty....i just dont get it.

Cherry, I think the difference between you and your friends with the cars is that you can see the difference between "want" and "need".

If you were to say to them "if you are cash poor then get rid of one of the cars/downsize/buy second hand etc" then they would come up with a raft of reasons why they "need" these particular cars. They dont of course, they want them and manage to convince themselves that they need them in order to justify the debt.

My friend who had the party I mentioned above put a holiday on their CC. She claimed that they "needed" it. No one needs a holiday. They really wanted one, so she convinced herself it was a need. Yet she never sees paying her rent as a "need" funnily enough, she will happily let her parents pay that!

I would find it quite scary to have this level of debt.

I have £75k mortgage on approx £200k house. As with others I was lucky to buy long time ago when prices were reasonable.

I have approx £4k over draft which is all linked to my mortgage (offset) and I hate it. It comes from ex and I seperating. I am trying to get rid of this as fast as possible.

Apart from this I run an 11 year old micra, have a tiny tv and don't own a credit card.

Agree Morloth, we've never had that level of debt and only ever got loans for specific items which have been paid off. I think there are some people who treat credit as free money to spend, rather than debt to be paid back. If you are only servicing the minimum interest payments and juggling 0% deals without reducing the amount owed then it is well time to re-evaluate spending.

IMO that is a lot of personal debt, but what are your incomes?

I know people who are for ever consolidating/switching etc and they never clear it..they have spent beyond their means and their income cannot afford to pay it off.

A friend of mine cannot afford to have kids because they bought a 12K car on HP and got a loan for a bathroom...FFS!!!

So many people turn judgey-pants when it comes to debt. I lost hours at work thanks to the government which is why I now struggle with my debt, it wasn't a problem before. The percentage on my mortgage is ridiculous- but it's the only way we could get our own house thanks to the state of the economy. I think it depends on your generation as to whether debt is normal or not. I'd say for 20-30 year olds it's normal now.

I think its become normal to have very high levels of personal debt, I don't think people think about what the consequences can be. Personally, I have a real fear of debt of any kind.

My parents run up personal debts just before the last recession, and then remortgaged by adding the personal debt to the outstanding debt on the mortgage, almost minutes before we plunged into the last recession. He then lost his job and she was left paying the new mortgage repayments by herself, where rates had shot up overnight to about 15%. Unsurprisingly, she couldn't cope with the level of payments. Soon we were getting regular weekly phonecalls from the mortgage company and because they hadn't been able to help themselves, we also had other lenders chasing us. One of my abiding memories is of debt collectors turning up at the house and my parents weren't in. I was a teenager and trying to protect my brothers and sisters as they were trying to trick their way into the house.

Eventually, the mortgage lender repossessed the house and we ended up homeless. We were given 2 rooms for the whole family to share in a homeless shelter. We were there 3 years. All because my parents wanted to have things immediately rather than saving for it.

Our combined income is about 60k. ((dp fulltime, me part time.)

We do live within our means, but the debt just seems to be going down very slowly!

We definately dont have plasma tellys/costly weddings/4x4's - it just financed a time in our lives where we had to work unpaid to get a foot on the career ladder in the industry we had chosen.

cherrychoo - Would you really 'not know what to do with a credit card' . I understand not having one but not knowing what to do with one is slightly strange?

There seems to be a lot of judgement on this thread that if you are in debt it is because you have bought all sorts of frivelous things that you don't need. Foreign holidays, ipads, designer clothes etc have all been mentioned.

Most people I know have debt and they have not spent it on these things.

Amongst other things our debts are based on higher education, training, basic cars (to get us to work), maternity leave top ups and we have borrowed to pay for childcare in the past.

In summary - all things that have developed our working and earning potential - so an investment. Ironically if we hadn't spent on these things we would probably have no debt but would have a lower family income, be claiming more in tax credits and paying less tax.

If you bought a house before 2000, went to university before fees and do not have extortionate childcare costs it is a bit unfair to judge those who have spent money on a small place to live and furthering their careers.

However judge away on the brand new bathrooms, super fast cars and holidays to the Maldives

OK, I'm going to be a voice of partial dissent here

The first thing you have to do is be seriously honest with yourself. How are you with your debt? What I mean is, is it slowly creeping up, or slowly creeping down? Are you living within your means?

If it is slowly creeping down, I see no reason why you can't remortgage. The interest you're paying on that money will be far lower. I would, however, couple that with a modest overpayment on your new mortgage, for example:

If your mortgage interest is 3% your repayment now will probably be around £837. With your debt added, it will be £933. If you are better off than you are now with that rounded up, say to £983, you will be over-paying your new mortgage and will not have to worry about the loans.

That said, many people in your position are as used to a certain level of debt as most of us are to a certain level of excess weight. If you think there's a good chance you will start to run up an overdraft again until you are back in £20k of personal debt on top of the new mortgage, do not do it.

"If you bought a house before 2000, went to university before fees and do not have extortionate childcare costs it is a bit unfair to judge those who have spent money on a small place to live and furthering their careers."

Can I just point out that some of us got burned in the boom and bust property market of 1990s, with negative equity and paid interest rates of up to 15%. Didn't have new cars or plasmas then, nor now. Maybe that made us more cautious ?

I think what you describe is normal nowadays, but I also think it is a lot of debt. You must be paying so much in interest! And it really restricts your freedom to make choices in life in my opinion.

My DH and I have no debt whatsoever, no overdrafts, credit card debt - but no mortgage either as we can't afford to buy property at the moment. We would prefer to buy a flat but not owning one will allow us to move close to our children's future schools without the hassle of selling a property and buying another.

We paid back our student loans a few years ago.

I know he does LeeLoo1, but as I'm not working and DH is retraining having a safety net is important to us. We can easily afford the repayments on the loan and when/if we move next yr will pay the loan off then.

I owe 14k on credit cards, DP owes 11k.

Mortgage is 115k, have approx 20k of equity. We owe about 13k on student loans which are being paid surely yet slowly.

This situation really does give us nightmares and causes lots of stress. We were debt free up until a year and a half ago, (except mgt and student loans) but DP lost his job as I started maternity. Then his car packed in. He eventually found new work but needed a new car as now self employed, travels round the country.

Both work full time, 2 DC, joint income about 60K.

We do not pay any interest on these debts as on 0% and we are paying off as much as we can now we are both working. We have cut our lifestyle back as much as possible and estimate it will take 1.5 years to pay it all back. Our friends are much more financially secure than us.

We do have another property that we rent out with a decent chunk of equity in but have decided against remortgaging or selling and will just do balance transfers as necessary.

About £12000 - overdrafts, credit cards.

No mortgage. We went.