People in extreme debt - is this really as common as I’m told?

[Lesterzap]

Chatting to my friend today who works id debt management. She was saying how busy it’s been since covid and COL crisis.

I mentioned how someone I know had ended up owing 20k. According to my friend 20k of debt is now a drop in the ocean and that there’s been a real increase in people in higher incomes owing 70-100k!!! Totally shocked by this. Aside from my mortgage I’ve never owed more that 5k (car loan)

surely that level of can’t be common?

We've never bought a car on finance - or a brand new car come to that, I just don't see the point of buying brand new due to depreciation - although I understand chip shortages have made secondhand cars as expensive as new recently - but not bought a car for perhaps 10 years, so we live cheaply!

Apparently new car costs have increased by 38% over the last decade. As you say used cars have gone up too. Cars are pretty expensive so if you saved up you could be waiting a long time.

My only debts are my car and mortgage. They both hang over me and I hate it. Not sure why I bought my car on a loan as I could have paid for it outright. Having said that, the interest is lower than what I get from my savings account as I got a good deal at the time. Debts can quickly mount up depending on where you've borrowed from and if you've made repayments on time. I watched a really sad programme about a courier who killed himself due to debt which started off from a council penalty fine of £60.

I think most people will have some form of debt e.g mobile phone contract, PCP or car loan, mortgage, paying up new boiler by monthly instalments etc but not really think of it as debt as they have more than enough to meet the repayments.

There definitely does seem to be more people struggling with their repayments post covid. The COL has vastly reduced most people's spending power and those who didn't have much to spare at the end of the month before covid will be really struggling to make ends meet now and of course debt repayments will be missed to prioritise feeding and clothing your family.

Life has turned pretty crap.

I've name changed for this post, because I'm mortified to admit that my in twenties and early thirties I got myself in a mountain of credit card debt - 70k at its worst. I had a small mortgage on an average house, didn't run a car or go on expensive holidays, but it was all the little things that added up to way beyond my means - nights out, good food, nice furniture, beauty products, an insane amount of clothes, etc. I had low self-esteem, no self-control, and was living the life I thought I deserved, not the one my modest salary allowed.

To this day, I haven't told a soul IRL about the mess I got myself into, bar a couple of close family members. I was known by friends and colleagues as the one who had my life sorted...if only they knew the truth!

I'm in my late forties now and debt-free, thanks to a massive reality check and many years of sacrifice. My bathroom needs replacing and I'm due some expensive dental work, yet I won't get either until I've saved. The thought of getting in debt again drives my anxiety through the roof, especially now I'm a parent. If it's not utterly essential I have the self-control to wait, because nothing is worth more than my peace of mind.

It's reassuring to read that budgeting is taught in schools these days because it certainly wasn't when I was growing up. Neither is it something my parents ever addressed with me in my formative years. When my mum learned of my predicament her response was, "I never got taught that either, yet I never got into debt." That may be so, but I intend to do my damndest to make my DC financially literate in the hope they won't get into the financial mess that I did.

Disclaimer - I know, of course, that some people have no choice but to get into debt to cover the bare bones of living and I realise that the solution for many isn't as simple as a change of mindset. Anyone who is in debt for those reasons gets no judgment from me - I reserve the harshest judgment for myself.

@BlossomCloud

If you're going to do that then why not just pay for your food shop out of your normal income on your debit card? Fair enough a vets bill, car repairs etc but food shopping?? Unless you're desperate of course. You're still paying a yearly fee for it.
I haven't misunderstood anything. These weren't the higher end low interest credit cards they were more then often those bad credit credit cards.

There's a terrifying advert that's been broadcast on terrestrial TV for the past year or so. I can't recall the name of the credit card provider, but it features a young woman cycling along a promenade that looks like Brighton, all very fresh and appealing.

But right at the end when the T&Cs appear, the interest rate is something like 125% APR!!

It might be Capital One, but I guess that's how!!

My vauxhall vectra cost me £500 on eBay from a Vauxhall car dealership . I've had it 2 years and besides new tyres and a new bulb it's going strong. I put £30 a month aside for a new second hand car for when this one goes to scrap.

That's the thing you have to be really disciplined. If you're not a high earner and have access to a credit card I can imagine it would be quite tempting to treat yourself.
All good and well people saying they pay it off each month but maybe that's because they either have incredible willpower or have enough money to buy holidays and clothes etc without using it.

I have 30k in debt.

I am a single parent and looking after my elderly mother, I had to take a dramatic wage cut when I realised I was either going to combust trying to find childcare continuously or be around more for my kids by going term time only and mainly school hours. My kids have high needs so I made the right choice for them but financially it’s crippling.

I live with my mother now, whilst the house is rented but it only just covers the mortgage and I’ve had to pay for new boiler/carpet/roof/cooker/damp course and did not have this ‘spare’ so it’s all gone on my credit card. I can’t not maintain the house and contrary to some people, as a LL I don’t earn from it monthly, it just means that hopefully one day I’ll be able to move my kids into our own home once again when I can work the school holidays.

I've got around 5k in debt ( car loan, personal loan and credit card) + 35k left on my mortgage and I'm stressing out. Can't wait to have my car paid next year, plus my personal loan and hopefully will then be able to clear the credit card balance quickly. My car was second hand but couldn't afford to buy it without a loan 2 years ago. It will have to do me for at least the next 5 years. I just hate being in debt .

Also this debt is not from ‘treats’. Me and the kids haven’t have a holiday in 4 years.

It’s from being a carer, a mum and the father paying minimal maintenance. Too much of this goes on and nobody really seems to care.

@Bluesclues1

I just ask. You'd be surprised how open people will be if you ask a direct question.

Fair enough. I don't recognise the names of those credit card companies so assume you are quoting them because they have more relaxed eligibility requirements. It is sad if their only way to pay for their weekly shop is to put it on their credit card. At least it is food they are buying and not fripperies.

The only debt I have ever had was my mortgage. If I can’t afford to pay for something, I don’t buy it. I do have a Credit Card, but pay it off every month.

I’m really not well off, so I just don’t have fancy holidays or cars. Actually, my car is now through the Motability Scheme, it’s the only time I have ever had a new car! I luckily managed to get a 2 year extension on the 3 years lease, you normally get the car for, so more time to save up the Advance Payment for my next car.

My parents taught me to live within my means, and it can be hard, especially with me being on my own now. The large increase in gas and electricity last Winter was difficult to manage, but I put an extra jumper on and actually lived in one room! The worst thing was having to pay the huge standing charges, but the cutbacks I made, meant that my bills weren’t much higher than the year before.

I just can’t understand why people Willy nilly spend money they haven’t got and end up paying far more, because of the added interest, than the cost of the goods they purchased.

Just remembered I did take out a BNPL from Very, just before last Christmas, but only because it was interest free. The money to pay it off, is currently sitting in an account earning interest and it will be paid up before those interest charges apply, meaning that I’m actually making money, by using the BNPL. 😬

I pay for all my groceries by credit card and pay the full balance off at the end of the month because that way it means my credit rating stays at an excellent rating (experian 999/999).

It is showing the credit companies that I am responsible to have a loan and pay it back without problems. I have no fee to pay and 0% interest.

I'm proud of my credit rating; I'm on a very low income, have a mortgage to pay and I'm single so no one to help me financially. I have no chance of earning anymore money so I've learned to make the the best of what I HAVE. Some people call me a tight bastard, I just think I'm good with my money.

Why do we focus on individuals and their struggles? This ALL stems from government. How many ‘businesses’ were receiving ridiculous amounts of grants and loans in the pandemic, many who were squandering money because it was ‘free’. How much money was wasted on PPE and looking after their own.

• Finance investment. The government could borrow to finance public investment projects that can lead to higher growth in the future.
• Political convenience. There is usually political pressure to cut taxes and increase government spending. Allowing debt to rise can be a way for the government to avoid difficult choices.

If governments act recklessly then personal debt increasing is sadly a by product. Your mental and physical health do not matter. The health and well-being of your children do not matter. That’s the sad truth. Government bodies are not doing their jobs. NHS, public transport, CMS, any government body. Absolutely no accountability. But, will the individual tax payer still be accountable and potentially prosecuted for ‘their’ debt, absolutely.

Individuals (particularly women) need to sympathise, empathise and look at the wider picture, and not stand for this patriarchal bullshit, that we have been led to believe is our fault.

I will say it again, since 2012, when the CMS began, £512.6 million in unpaid maintenance has accumulated.

That is debt owed directly to Women and children, and it’s growing every day.

@fullbloom87

Unless you're desperate of course. You're still paying a yearly fee for it.
I haven't misunderstood anything

I think you are misunderstanding that, used properly, credit cards are a good way to build up a credit rating, and in many cases, they are fee free and come with added perks. So, by using them for shopping as well as other purchases, people are making money, not losing it.

I have 3 cards, none with fees, all with perks, both DH and I use them as default payment and have done for 30-odd years, all paid off monthly, I keep track of spending. Yes we could use debit cards, but credit cards give more protection and perks.

We are definitely not desperate 🤣🤣 - never been in debt, have substantial savings and live within our means - our young adult children are doing similar, live within their means, use cards and pay them off, allowing them to build good credit ratings for when they buy a house.

I appreciate that the cards you are referring to are probably used differently, but for many people, using credit cards, paying off in full and getting perks is a good way to manage their money.

Please educate yourself before accusing people of being desperate.

Even Martin Lewis doesn’t think a student loan is “real debt”, and a graduate tax. if you don’t earn enough to pay it back, you don’t and eventually it’s written off.

However, it is the PCP and credit card debt that gets me, for non essentials, not people who have had a divorce, job loss, CoL etc. it’s the use of them to support a lifestyle beyond their income. The expensive beauty treatments, the best restaurants for the insta, the 40k wedding, long haul holidays.

Terrifying.

I know what you are referring to. It’s just plain wrong to call it a bedroom tax. Thats not what a tax is.
No one calls it a Posh House tax because housing benefit/UC only goes up to the average price in the area and not the full rent of all the houses.

I use my credit card in shops and then pay off most (or all) of the balance when I get paid. I’m trying to increase my credit score and it’s helped a lot.

God, I hope the people in Sainsbury’s and Aldi aren’t judging me🤣

Please look into landlord insurance. We had a tenant, who didn’t pay. In the end he had 12 months rent free. Then there were solicitor and court fees on top, a lot of cleaning (filth), rubbish disposal and repainting. We were lucky he abided by the eviction notice and didn’t really damage much.

I have a high 6 figure debt owed to HMRC thanks to the poxy loan charge. I will be paying it off until I’m dead. It’s very depressing. No credit card debt though and a small mortgage cancelled out by a bunch of BTLs I can’t sell (cladding issues) which I’m now having to subsidise every month for an amount that’s more than I earn. Such a joy.

if you friend works in debt management knows the statistics, why wouldnt you believe her?