To think that personal debt levels must be very bad

[linblondie]

Hi

So before I start, I know that for many people debt is a product of totally unforeseen circumstances and life events etc, however a few things that I have observed recently have led me to think that debt levels must be astronomical.

I went to change my car on Saturday. I was looking for something for about 3k to replace my old banger. I was telling my niece about this and she asked me why I didn't get a new one 'on finance'. She is 21 and has just taken out car finance for 15k.

I listen to some of my colleagues stories about their finances. Most of them are 5-10 years younger than me ( I am 46) and they think nothing of taking out large loans. It almost seems normal to owe tens of thousands of pounds in debt.

Is this really the way that people live? I would never sleep lol

I honestly think this is a why if life/the times now. I am late 30’s and not terrified of debt and quite happy to have some for valid reasons but some friends who are late 20’s/early 30’s don’t think twice about getting finance for huge amounts!

People stopped being scared of debt when money was almost free. Low interest rates made saving for things seem like a waste of time. Now interest rates are rising there’s a cost to it, though in real terms it’s still less than inflation by a long long way.

I was looking at second hand cars the other day and was shocked by how expensive they now are. Even a 6yr old picanto was over 10 grand. I’m sure it didn’t even cost that much new. If you’re in your 20s/30s then the cost of housing is extortionate to your wage, compared to previous generations. Factor in saving for that deposit, whilst paying huge rent, all whilst repaying a student loan (something 40+year olds might have missed), then sometimes you have to accept finance and have a much more relaxed attitude to it.

Yes, it's always shocked me. I'd be a nervous wreck the whole time. I was brought up with the attitude of not spending what you don't have and I guess it stuck. There's also something satisfying at finding a bargain. Well that's me anyway.

We've just done car finance for the first time and I am loving have a high quality new car. The interest is fixed for the term of the loan and includes servicing at the main dealer. I think it's saved us money vs paying for MOTs etc.

DH is fixing the mortgage for 10 years, I think my interest free credit card has maybe £30 on it (handbag purchase split over a few months) and we have a small amount of the kitchen left to pay (again fixed payments).

Unsecured credit cards with variable interest scare me but fixed rate is an ideal way to split the cost over a term you can afford and get something better quality to save money in the long run.

I’ve got about £4k debt and only just about break even every month some months I don’t manage that.

A year ago I had over £10k debt but had around £1200 left after bill I’ve had a change of circumstances. I was less stressed with the higher debt and more disposable income.

I dont see a new car on finance as a bad debt. Obviously it depends on individual circumstances and income etc but a new car is reliable generally and for some people this is important. A pcp loan is essentially a lease, you pay the monthly payments, never own the car and usually just trade it in at the end of the term using any equity as a deposit on a new one.

Borrowing had been so cheap for the last decade - younger people don't have the same fear those of us in our forties (or older) have, because we can remember interest rates running out of control.

We've had a long period of relative affluence. Interest rates have been very low, employment has been stable, so debt is not a frightening prospect to anyone who can't remember the 80s and before, high interest rates and unemployment.

If we have a protracted recession, that will change.

Young people are conditioned to think debt is normal from age 18, due to carrying such high student loans. Then car finance, mortgage etc. All at far higher amounts than ever before for very normal cars and very average houses.

Also debt has not been seen as a huge moral failing for at least 2 decades.

I'm not old, only early 40s but I've seen the massive change in last 25 years when my cohorts were the first to have student loans.

Also many people young and old realise that sometimes it is worth buying now to enjoy and pay for it over time. Harder more stressful lifes mean some compensate with spending. Lots of reasons.

I'm shit with money and fully admit it!
Some debt I feel is ok - so I would 0% finance something rather than pay it up front providing the finance stays as that. I've done it before when my fridge freezer broke and I needed one. Also for a sofa because it worked out cheaper on finance weirdly
Klarna I use a lot for ordering different sizes so I can send it back before I've paid for it

I’m 40 and I started working life in early 20s with 40-50k debts in student loans, suspect that has impacted my generation and those subsequent. It is something people are accustomed to early in life. I only have a MG and modest CC myself but I understand the mindset!

If its interest free I would do it but obviously within my limits.

I grew up 50s/60s, and people weren’t encouraged to borrow. Many of my parents’ generation viewed a mortgage as a millstone. DH and I had a mortgage, have borrowed to buy modest cars in the past, for furniture and other necessities, but not for luxuries. We save until we can afford extras.

I remember people losing their homes in the 80s, so I find it worrying that people will borrow for non essentials then struggle to have enough for necessities.
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I don’t people fear debt (or rather it becoming unmanageable) in the same way.

1980s? You were fucked, and there was only CAB who would confirm you were fucked.

2020s? A variety of charities like Stepchange who’ll make part of your debt disappear in DMPs or all of it in IVAs etc.

A little flippant, but I feel everyone knows someone who’s had thousands written off with no long term impact.

I think that it is a really good point @RoseBucket and very silimar to my own circumstances

5 years ago I was struggling with a very low income and 3k debts due zero disposable income. I am now in a relationship, have a good job BUT have 28K debt.

Despite my debt being high now ( I'm working on it), I am in a much much better position now that I was 5 years ago. I certainly wouldn't swap back!

I think that when we think about debt we tend to focus on the total amount, however it's the big picture that really matters.

I don’t have car finance but I really don’t see the issue with it. If you don’t have the money to buy a new or nearly new car outright then it can make a lot sense. I imagine it’s reassuring to know your exact monthly car costs and budget accordingly versus the threat of large surprise bills of older cars not to mention it’s inconvenient to deal with breakdowns and scary to be stranded somewhere far from home. Your niece sounds sensible enough, at 15k it’s hardly like she’s gone for a flash car.

I’m in my mid 40s and it’s very usual amongst my peers (I know because we’re friends and have been for yonks so discuss these things) to have substantial debt

i’ve almost never been in credit since opening my student bank account. First it was university living costs debt, then a few years of low paid work and rent, then moving / furnishing costs on my first house, then nursery fees and a stalled career after mat leave. And now here we are working in the public sector having pretty much never had a pay rise and yeah, still big debts 🤷🏼‍♀️

Debt is heavily advertised to the young – you can buy Deliveroo on Klarna. “Buy now pay later” is everywhere.

It's been the way of life for many years for a lot of people but I do see more people in there 20s in serious debts so they can have the latest holiday, car, night out etc. Unfortunately rates are increasing and many of these debts may become unaffordable for people. I am 42 and have very little debt as if we can't afford it we don't buy it. I did run up £15k of debt in my 20s and paid it all of. I will never do it again.

My sister worked as a mortgage adviser for a good few years. I remember her saying how customers would apply for a remortgage to pay off their debts owing astronomical amounts. 20-30k was commonplace and pretty much seen everyday. She always said that most people hadn’t really got a clue about how much they owed, or how much it was costing them, and worked be genuinely shocked when she pulled their credit reports and discovered the true extent.

my neighbours both have brand new cars, holidays abroad and all of the lovely home things that I’d like- new kitchen, log burner etc etc. they both work in normal jobs, unless they’ve had a big win, I’ll assume they’re carrying a high level of debt

Remember being out in London with a group about 10 years ago and everyone sticking their credit cards on the table to pay for dinner. I was quite shocked, to this day the only thing I use a credit card for is booking flights and hotels, car rental. Things you can only pay for with a credit card. I clear it every month. Why would I want a loan for dinner when the money is in my bank account?

Why would you not want cash back/vouchers and the interest off your money for another month before you paid off the card? Some of the credit card users could be much more savvy than you, using credit cards does not necessarily equal being in debt or bad with money.

Because you get rewards for it like cash back, vouchers, air miles etc. It’s literally free stuff for money you would have spent anyway, why wouldn’t you want that?!

Not sure this is a totally recent thing. I have been in debt - my debt hovered around the £12k mark for most of my twenties, now early forties - and I paid it off only when I got a much better paid job. Until then, yes, I bought things on credit. Small things that added up over time. It's not always people frittering money away on designer bags or car finance. Sometimes it's just sticking a couple of supermarket shops and a train ticket on a credit card every month and not clearing the balance. It just snowballs. I am glad payday lending has died a death but I hate Klarna and am so glad it didn't exist when I was younger.