What would you say?

[bobcat81]

Bit of a strange one but just go with it....

So lets say that you take out a £4000 loan and over the course of the loan you pay £800 interest so £4800 in total.

if someone asked you how much debt you have, would you say £4000 or £4800.

I think that you would say £4000 as nobody states the interest. dh disagrees.

It's the total amount that you owe so £4800

but we wouldn't apply that rule if discussing a mortgage etc?

I've never had a loan which is materially more with interest than the original capital. So it would be about 4100 and I would probably round it down to 4000...

The mortgage total is variable of course.

Yeah I'd say 4000.

You've borrowed 4 grand.

Then you're just paying the interest on top. You dont actually owe the 800 at the start of the loan as you've not had the money for long enough to gain interest on your loan.

So when you get a statement you'll know how much you owe. So after a year maybe 3200.

Then after 2 years 2400. So I'd say I owe nearly 2.5k

You'd say £4000.

When people take out a £300k mortgage, if they're asked how much debt/mortgage they have, they say £300k. They don't say '£386,900' because that's what they'll actually pay back over the term.

The outstanding loan at any point is the unpaid capital (plus any accrued & unpaid interest). The future interest isn't yet applied.
If you wanted to repay on day 2 you would be unlikely to have to repay £4,800, but you would probably pay some kind of early settlement charge (depending on the T&Cs).
Your outstanding debt is the amount outstanding at any particular point.

£4800

I'd say my debt was 4k. The interest would vary depending on the day the question was asked and I would understand the question as referring to the capital amount in any case.

I would say £4000 on the basis you could pay off early and not owe the interest.

I think that it get a bit confusing as the total amount with all of the interest is listed on your credit file

Speaking in accounting terms, the actual debt itself at the start is £4000 and reduces every time you make a repayment. The balance of the amount does not go over that figure as you make a repayment each month, and they charge the interest. The interest charged is less than your repayment so the balance goes down each month.

The debt is not £4000 plus interest, because you could theoretically pay it all off in one go and pay no interest at all.

You would say I have a debt of £4K on a credit card, and people would know there would be interest to pay. However if you ultimately pay £4800, and know you will pay over the full term, then stating the debt is £4K is just semantics. Stating 'my debt is £4000' doesn't mean you don't pay the extra £800 and have to earn the extra money. It doesn't make it go away, or mean you don't have to go without other things. So you are both right.

The company listing the full amount on your credit score recognise the reality of the amount you pay.

I would say £4000 in general conversation. The interest paid is something that can vary depending on early repayment, transfer of loan to a 0% credit card etc but the £4000 is always going to have to be repaid. Personally I think that is the norm for domestic budgets, but a business would need to report the value of the 'finance' so the interest will be included.

Neither is wrong, including the interest is more accurate really, but I think most people say what they borrowed and ignore the cost of the borrowing.

This is correct, IMO, but not how people speak in normal life.

You would say £4k. Everyone knows that interest is payable on most borrowing, so you just say the principle amount.