To think getting into debt is incredibly easy?

[Username1917]

I had a comfortable upbringing, parents taught me “don’t buy what you can’t afford, saving is important” etc.

I got a job at 18 and a few months later was offered a credit card by my bank, for the first few months I paid it off in full religiously. Then I thought well I’ll just pay half this month and half next month, no big deal! Then it spiralled and I thought oh I’ll just switch to an interest free deal and pay it off before it ends. Then when the interest free deal expired I got a loan over 5 years because it was “much cheaper” per month.

Before I knew it I had debt (including PCP car) the same level as my salary, at the time that seemed very manageable.

I’m lucky that I have a well paid job now and have paid it off in full. It’s given me a right kick up the bum and now I have no debt, but AIBU to think this is not uncommon, even having grown up with parents that tried to teach me about money?

@Cassilis

OP, maybe you got in debt because you had a comfortable upbringing and know you have your parents are a cushion.

I grew up poor and have never wanted to be in debt, as l never had the luxury of being relying on anyone to bail me out. No credit cards, no loans, nothing (student loan now paid off and mortgage being paid off).

This is a good point (IMO) I hate the idea of being in debt (apart from mortgage).
I use credit cards but pay them off.
I won't consider any loans for things like holidays - I mean that is stupid since paying more for than should and for long after the holiday has gone.

Buy now, pay later. Spread payments over 4 years. Get a discount for signing up to a store card

We got 10% of our sofas (which were already 50% off in a sale) by taking out a store card. Saved us nearly £300. We paid it off in full straight away, and they've since put the credit limit on that card up to £12,000. I get junk mail from them all the time, trying to get me to use that card, which is amusing, because it's a Laura Ashley card and all their shops have closed down (although it can be used in other shops, too).

Very easy. Late 90’s renting, low income, encouraged to have direct debits by the bank. One came out early and we were charged (£30 I believe at the time). That was a weeks food budget.
First flat, winter, newborn baby, electricity heating bill was eye watering! Pay or go to court!! Dh said well we need to eat, agreed to the credit card that was pushed to us. More direct debits bounced (no online banking to check, had to go into town to check mini statement from the cash point) MORE bank fees (sometimes £90 a month!).....spiral

My gran told me years ago....It takes 2 mins to get into debt & a lifetime to get out of it..this has stood the test of my life the only debt I have is the usual living costs,nothing I own is on credit. Gran used to say if you need to borrow money for whatever,you cannot afford it,how right she was all those years ago. I don't understand the mentality of people who take out loans for a holiday,or even Christmas what is that all about? they are still paying it back 10 Christmases later,I work with 3 peop!e in that position,& they wonder why they have no month at the end of the money,sadly you just can't get through to them,because the NEED that stuff right now.

@bp300

Nobody seems to understand that new money is created when it is borrowed. If you have savings it is at the expense of someone else being in debt. The only reason I was able to buy my property and car for cash is because someone else has borrowed the money to create the money for my cash purchases.

What? That is literally not how it works at all if anything it’s the other way round!

Similar story for me. When I was a student I maxed out my overdraft, when I worked I maxed out my credit card. Then another credit card. Then I paid it all off by taking out a loan (cheaper per month!). But, like an idiot, I promptly went back to putting everything on the credit cards again. Before long I was taking out payday loans, I only accepted I had a problem when it got to the point where on payday I'd pay off the payday loan, immediately take out another payday loan to cover my food/bills for the month, then use the rest of my salary for rent and making the minimum payments on my debt. I only really got out of it because of the PPI compensation halving my overall debt overnight.

My thinking for how I got into so much debt, aside from stupidity, was that I always expected tomorrow to be better. At school we were told "work hard, go to university, and you'll succeed" - what bollocks. I didn't mind being in debt at university because I would just pay it off in future when I was obviously going to be earning loads. Then, when I started working, I was earning 10k per year which was just enough to keep afloat. But early on in my career pay rises were quite common, a couple of years later I was on 16.5k - this encouraged me and led me to wrongly think during my career I could expect to increase my pay by about 50% every couple of years. Wrong. Financial crash. My "plan" to pay my debt off when my wages increased came crashing down with it.

I don't think it's as easy to get into debt now as it was twenty years ago. Back then people received pre-approved loan applications in the mail, just sign your name and 5k or 10k is yours. But, it's still too easy. I could get 15k in a hole within the hour if I was irresponsible enough to.

I’m 63 and I’ve never been in debt, never had an overdraft. We were brought up to believe if you can’t afford it, you can’t have it and I save for anything I need/want.
And they wonder how come Boomers have so much money. It's because we only spend money that we have and don't get caught up in keeping up with the Jones's.
We had very little in personal possessions and no debt. People nowadays seem to have so much stuff (to the extent that 'decluttering' is now a concept) but it is acquired through debt.

@bumpdownthestairs

I went onto my online banking, when it was a relatively new thing about 10 years ago. I was 19 and across the top of the screen was written 'you are accepted for a loan to the value of £6k', stupid young and skint me to part of the 6k then months later went back and topped the loan up to the full amount and completely wasted the lot. Yes I made that stupid choice I take full responsibility but when I think back it was shockingly easy to get and I hadn't even applied for it. Just offered it. Doubt it would be allowed now and there is probably a case to be made for miselling. I'm sure I only earned around £12k at the time!

This is pretty much the situation I was in. I didn’t lose my job or fall on particularly hard times, I just lived frivolously on credit that was shockingly easy to obtain (and pushed in my face, I didn’t actively go looking). It’s very, very easy to do when you’re young and naive and unfortunately the consequences can be lasting.

Yes. I have no debt now but I have done in the past. When I turned 18 the bank offered me £1000 overdraft. I had no financial knowledge and had no idea there would be fees, I thought it was just free money! I spent the whole thousand and it took me years to repay it.

08:38Username1917

No its the opposite way to how you think it works. How do you think asset prices have been increasing for decades without new money being created? Money is borrowed into existence.

One of the best marketing ploys of our time is rebranding debt as finance.

This

A question for the people who say it's too easy to get into debt, would you be happy if it was harder to borrow money?

For example:

No overdrafts at all and all credit cards worked as charge cards in that the balance was paid off every month and if you couldn't do that, it was converted to a six month loan and stopped working for that time period, so you basically had to live on whatever income you had. Klarna and similar schemes banned. Forced cash based budgeting if you like.

All your bills are taken off your salary straight away, an amount put away for annual expenses and you have to make do on what you have left until the end of the month.

No such thing as a 'free' mobile phone on a contract. All phones have to be bought outright and you just have to buy what you can afford. Same for other 'non essential' household appliances (yes phone is essential, but a £1000+ iphone is not), also things like holidays and other discretionary spends like Christmas and takeaways.

Very restricted credit available very cheaply for household essentials like washing machines but you basically have to ask a bank manager in person for approval, who will go through your finances and spending to make sure you're being responsible with your money.

So no-one can get into debt and everyone has to live within their means, which are sufficient to cover essentials and some luxuries, but not everything that anyone could ever want, we're talking about the average majority, not those who genuinely don't have enough for the essentials or any luxuries, but not those who can have everything they want without compromise.

You could have a fancy phone or a holiday for example, but not both, if you wanted to go on holiday, you'd have to make do with a £150 smartphone not the latest £1k+ version.

So no-one would be able to get into crippling debt, so we'd all be happy with that?

My parents were awful with money, lots of debt and nothing to show for it.
I was then in a financially abusive relationship and he ran up a lot of debt. I wasn’t aware of how much until I left.
Ten years later I’m out of debt and very scared of it. It’s made me quite anal with money.

YABU. We are nannied to fuck in the UK. You were an adult. It's not up to the world or the government to hold our hands all our fucking lives. O penalise other adults by making it harder to borrow because some are feckless.

partyatthepalace

Yep. Desperate need for better education and better regulation.“

Agree, beginning with compound interest.

(ie: teaching kids what it is and how it works)

I think it's very easy but I also think a lot of people are very complacent about debt too.

Our only debt is the mortgage but I know people who think nothing of owning 20k on credit cards - to them it's just normal.

I read the debt threads on here and see people saying things like "we wanted (not needed) a new kitchen so we just took out another 20k loan" - that's something I'd never even consider doing ifykwim.

I think attitudes to money have a lot to do with it but the complacency some people have around money never ceases to surprise me!

To all those (including OP) questioning bp300's comments on where money comes from, you are wrong and he/she is right.

Though I think his/her point is irrelevant to the thread discussion, bank deposits which form 97% of UK money is created by commercial banks, not the Bank of England, and it comes into existence when they make loans (and vanishes when loans are repaid.) Banks do not get money and lend it, they create it out of thin air when they make a loan, and it then circulates through the banking system, the net new money vanishing again when the loan is repaid. This information is on the Bank of England web site.

It is mind-blowing, and the opposite of what we've always thought happened, but it is right.

(One of the reasons I think it's irrelevant to the tread is that we could still have money without having commercial banks create it be issuing debt, the Bank of England could just create and manage the supplyl. But that's not the system we currently have.)

It depends....

I've never been in debt apart from a mortgage. I had three jobs at school and have always worked hard and not stretched myself. However, there is a element of luck in there too - good health, no splitting from my husband, no redundancy etc.

I know some people can have money troubles with ZERO fault of their own but all my family and friends that have money problems also seem to make a lot of really dumb decisions. It's annoying when, for example someone has a huge fancy wedding then complains they are In debt. It's hard to feel any sympathy especially when their are people who actually can't do anything about their situation.

There must be thousands and thousands of people who are now in crippling debt due to covid and the lockdowns.

I think it's criminal that so many of the sharp practices that seemingly 'reputable' companies carry out are legal. So many products and services are purposefully designed to confuse customers and trap them into paying more than they want to. It's disgusting and morally dishonest. Introductory 'cheap' offers are often misleading and confusing but most or all of the banks offer them. Many Energy companies and phone/tv and broad band companies all had awful complicated pricing structures and contracts designed to confuse people
Lots of people are going to get caught out with buying new cars again due to misleading and complicated contracts.
One of the very worse type of companies that literally have no shame and no morals at all are betting companies. They are truly disgusting.

YABU. We are nannied to fuck in the UK. You were an adult. It's not up to the world or the government to hold our hands all our fucking lives. O penalise other adults by making it harder to borrow because some are feckless
How would having better regulation and responsible lending make it harder for adults to borrow what they need?

For example, surely if someone needs to borrow there is a wealth of products out there that they can research and apply for, without sales assistants using incentives to push a high interest store card as an impulse buy. Do stores really need to be giving regular adverts over the sound system in store about opening a store card? Is Klarna really responsible lending for most people (I'd read somewhere that if a business offers Klarna then the value of the baskets goes up)?

Would responsible lending regulations limiting debt products designed to get more people to buy more online, spend more in store on impulse really stop those who want to use credit responsibly? I doubt it.

@DenisetheMenace

(ie: teaching kids what it is and how it works)

If people knew how the system worked and how money was created when they borrow it then nobody would pay back their loans.

I think it's very easy to apply for credit and be accepted, but it's also very easy to just not apply?

I learned about compound interest in maths classes in primary school.

Don't they do that any more?

Anyway, Martin Lewis has done a lot of work on financial education.

There's the stuff on the Moneysavingexpert website, a textbook that's distributed free to all schools and can be downloaded from:

www.moneysavingexpert.com/news/2018/11/financial-education-textbooks-funded-by-martin-land-in-english-s/

Plus a free formal financial education course in partnership with the Open University:

www.open.edu/openlearn/money-business/mses-academy-money/content-section-overview?active-tab=content-tab

The information is available if anyone does want to learn.