Is debt considered normal these days?

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Just that, really.

We have a car on finance (good deal) and mortgage but otherwise refuse to buy anything on credit - no pay later, overdrafts, credit cards etc. As soon as the car is paid I wouldn’t get another on finance either (husbands idea to do it and I don’t want to again!).

If we want something like a holiday, new furniture whatever we save for it.

A good friend of mine recently shared with me that her and her husband have just under £30k on credit cards, plus a holiday for £4K that needs paying before the summer. Plus car plus mortgage.

She said this without a care in the world - as though it was normal and she’d pay it off later.

They’re good earners so I think they must be living hugely out of their means but she seemed shocked that I was shocked by it?! I hate the car finance as it is and think I would feel incredibly stressed with that credit card debt sitting over me?

I know there’s an element of keeping up with the Joneses etc but I was so surprised (she spends a lot, regularly posts her days out etc on social media).

That’s neither here nor there though is it? You’ve borrowed money and tied it up in your asset when they could be making money investing it elsewhere. They’ve decided for all sorts of reasons that x% of their cash will be tied up in residential mortgages, but you don’t have any right to it. You have to pay for it.

It may be relatively low risk lending (you don’t need to put risk in inverted commas, because it IS a risk) for the bank but it’s still a very substantial loan of hundreds of thousands over a very long period of time which could be invested elsewhere if it wasn’t being loaned to the homeowner. So like I said they don’t charge you interest for nothing, they charge interest so that it’s worth their while lending to you. It’s called basic economics.

We have no debt, no car finance (always saved and always buy second-hand), credit cards but pay them off straight away and used infrequently.

We have had a few loans over the years, small ones for cars (topping up our savings), new bathroom and studies but never for luxuries like a holiday.

Do you think banks should lend people hundreds of thousands of pounds over 20 plus years for no return? I think you’re mistaking a business with a charity.

@Sunsweetsandandicecream When I was a kid a "family holiday" was a day trip to the nearest beach if we were lucky. I wont describe how we lived when we had our first (rented) home - too outing. We wouldnt go into debt for family holidays if we had no savings and an old car.

Never wasted money on anything but especially not on debt repayments.

Debt repayments are only ‘wasted money’ if you’re paying interest on them.

People are much wealthier now than they were then. That’s what decades of globalisation and capitalism has done to the world. What you used to get and enjoy isn’t the same as people now, with cheap consumer goods, cheap international travel, cheap borrowing, a service and tech based economy. Surely you can see how things have changed in 30,40,50 years that mean people do have more money. They aren’t the same as your family were but just with debt.

As a child, my parents had very little money. Anything needed was saved for, and no holidays other than days out.
I still tend to live by the mantra, that if I don't have the money I don't do it. Credit card paid in full every month, no car finance, and due to saving mortgage paid off early.
I would probably. Be quite anxious if I had debt.

Or if you are paying more to borrow than you're earning on the money. As several people have observed, a strong credit history (which you build by using credit) allows you to borrow money cheaply and invest it at a higher rate.

Of course not! They’ve got a great deal..

ike I said they don’t charge you interest for nothing, they charge interest so that it’s worth their while lending to you. It’s called basic economics.

Uhm yes. That’s my point. It’s worthwhile for them. Obviously.

hth

You said you’re paying the banks interest for nothing?! I’m pointing out it’s not for nothing. I don’t think I can help you any further.

It’s worthwhile for you too, because who else would lend you that money? If it wasn’t worth your while borrowing the money from the bank, you wouldn’t do it, surely?

And so have you. You get to buy a house that you wouldn’t be able to buy without them lending you that money.

I actually only got a credit card recently purely because I am going to stay somewhere that you need a credit card to check in. I am in my 40s and was brought up that you saved for things and loans were only for houses and cars.

I also tend to use cash a lot as I find I spend less than tapping my card. It makes me much more mindful on what I spend my money on.

Oh dear. Comprehension issues. Never mind.

I think this video is worth people watching.

It’s not their comprehension issues. It’s clear from your original post that it has suddenly hit you how much interest you pay on your mortgage and enraged you, as you hadn’t really thought of it in cold hard cash before.

In your passion in telling everyone else about this you referred to it as “paying them for nothing”.

It’s obviously not “for nothing” but i imagine you meant you see no additional benefit to yourself, personally, over and above the house, on which you are paying off the capital loan.

This is a bit of a basic way of looking at it, but overall, probably not worth a big debate.

Interest rates are astronomical though aren't they? The banks take you for a ride; it simply is not sensible to pay back extortionate amounts of money, just because they loaned it to you. It is too high a price.
Imho you should never pay out extra money (outside of a mortgage), unless you have no choice. It is actually ridiculous because our mortgage repayments went up, instead of down! I think the economy is improving slightly, hopefully, so they're set to go down (I hope).

Saying the above, does anybody know if a reevaluation of your property is worth it, in terms of mortage?

Hmmm… I don’t see how having a car on finance is any more virtuous than buying furniture or anything else in credit. When I bought my first house, I bought my sofas on credit (2 year, 0% interest deal) because I had a lot of other expenses at the time, and a whole house to furnish. This allowed me to spread the payments. However, I wouldn’t take out credit if it involved paying interest (aside from mortgage, obviously).

It’s the Bank of England that sets interest rates, not the individual banks. They make a profit on top of base rate, because they’re a business.

It depends on your mentality and circumstances. I think. I was raised by my grandmother who passed on her horror of being in debt. I just had to take out a credit card to pay a huge vet bill and I feel sick. DH is the same. Yet his brother and sister in law live a lifestyle they cannot afford and plug the gaps with credit. I cannot fathom how anyone feels comfortable getting into thousands of pounds of debt for luxuries, especially when they are both self employed. Then I have friends who have about 15k of debt from a bad time in their lives, job loss, car breaking down and needing to be replaced etc. They are not happy about it but they had no choice, there is no point in letting it bother them. They are working toward paying it off and try not to think about it. Beating themselves up about it isn't going to make it go away.

Probably to the former bit of your post about finally seeing interest paid in cash terms rather than just a payment every month for our houses (yes we had 2 but have sold one). Def not correct ref comprehension, a pp didn’t understand what I was saying. Added to that.. I’m not passionate about telling people - this thread asked a question about normalisation of debt I think. I’ve forgotten now sorry op.

But it’s not ‘basic’ it’s the way it is and it’s our society (as per the economists video).

Having no finance can adversely impact your credit rating, plus you're missing out on added protection purchasing through credit card as well as points/offers etc.

I work in finance so very careful with credit rating. I have a couple of different cards I use and pay monthly leaving £200 balance each month. This improves my credit score. If you pay off yo nil every month this will also reduce your score.

Having continuous debt and not using credit cards as a tool is also very common yes.