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Original poster

Unsecured debt

153 replies

Cookiemonsieur · 29/12/2023 20:51

Cheeky question so feel free to scroll on-

How much unsecured debt do you carry as a household, and how does this compare to your income?

ours is 31k on a joint income of 72k and I’m uncomfortable with this and about to get intense with paying it back

OP posts:
GeneCity · 31/12/2023 12:53

Sorry @Wantarest, I didn't tag you in my reply below.

I also like to keep my money in my own pocket 😄.

Wantarest · 31/12/2023 12:56

The operative part here @GeneCity is "IF YOU WANT TO EARN THE CAR OUTRIGHT". Sorry the caps is not for shouting but rather emphasising.

Why would you want to earn the car outright? I personally prefer to have a new car every few years. I have no interest in earning a quickly depreciating asset of this type outright.

In fact, what you posted aligns exactly with what I have been saying.

DontBeAPrickDarren · 31/12/2023 12:56

About £6-7k on a combined income of 85kish. All interest free and scheduled to be paid off before the interest free period runs out. Downside is we should be using the money we’re repaying debt with to overpay our mortgage while our rate is still low. It is what it is, an annoyance but not a millstone for now.

Wantarest · 31/12/2023 12:57

oh dear @GeneCity my apologies. I did not read you post correctly 😁. We seem to be on the same page.

Singleandproud · 31/12/2023 12:57

£30 000 a year income
£40 000 interest free loan to my parents - repayment £200 a month.
£20 000 loan at 3.3% used for bathroom/kitchen and boiler and radiator replacement - repayment £326 a month

Should have the balance of everything repaid by October 2029.

Own my home outright (hence parental loan), own my car and phones etc. Credit cards are used for majority of spending for cashback but paid back at the end of each month in full.

Weedoormatnomore · 31/12/2023 12:58

None however we had about 35k I think in 19/20 need to check was hard but finally got there. You will get there too just takes a lot of work planning and watching every penny.

Chewbecca · 31/12/2023 12:59

It's much cheaper to own a car outright and NOT replace it every few years than it is to service car finance though.
My car cost £8k in 2015, it was 10 months old, an ex demonstrator. I still have it now, it's in great nick and doesn't cost me much to run at all. I'll keep it until it does which could easily be another 10 years or so. The total cost is certainly less than car finance though we are not comparing like for like. I don't need a new car every couple of years so it would be a waste of money.

baileybrosbuildingandloan · 31/12/2023 13:00

littlemousebigcheese · 29/12/2023 20:59

No debt except mortgage, unless that counts?

That's not an unsecured debt.

Weedoormatnomore · 31/12/2023 13:02

Wantarest · 31/12/2023 12:56

The operative part here @GeneCity is "IF YOU WANT TO EARN THE CAR OUTRIGHT". Sorry the caps is not for shouting but rather emphasising.

Why would you want to earn the car outright? I personally prefer to have a new car every few years. I have no interest in earning a quickly depreciating asset of this type outright.

In fact, what you posted aligns exactly with what I have been saying.

Out of interest how much does your car cost a month? Does it include a decent mileage allowance and servicing etc.

baileybrosbuildingandloan · 31/12/2023 13:05

No. It's that only the debt free ones post!
Hard to believe that none of these people have a CC, Amex, Next acc, etc tbh.

I've had lots and I've had none in my lifetime as a single parent who never recovered financially when my darling husband ran off with my rich 'friend'.

Currently £16k on an income of £46k. Will be clear in 2 years. Quite happy with that.

You sound organised and focussed OP. You'll do it. Money Saving Expert's Debt Free wannabe gives lots of great ideas, including clear snowballing (which card etc to throw money at in which order to pay the least interest).

Good luck!

Kazzyhoward · 31/12/2023 13:05

We've no unsecured debt at all, in fact no debt at all as we paid off the mortgage a while ago.

There have been a couple of occasions that we've had debt. We took out a loan for a car once of about £5k. Another time, we started a family and went self employed at the same time, so had to live on a 0% credit card for a few months, which was, again, about £5k, and we paid it off quickly as soon as the business started earning income. But we've never taken out debt for any other things, never for holidays, never for home improvements, never otherwise for living costs etc.

On both occasions when we had around £5k of debt, we were very aware of it and made sure we didn't overspend so that we could pay it off pretty quickly. Never bought cars on leases nor any other form of rental, which is akin to debt.

Weedoormatnomore · 31/12/2023 13:06

Chantellier · 31/12/2023 10:28

Interesting thread. I’m a mortgage adviser so I get an insight into peoples borrowing habits and believe me, a lot of people have high levels of debt. It’s usually couples who have high salaries that carry the most. It’s not unusual to see a couple on 6 figures carrying a joint 6 figure unsecured debt. It’s usually because their salaries shelter them from the reality- they can afford the repayments so all feels well and good.

I did a remortgage for a couple about a month ago who owed 90k on credit cards between them, as well as other car debts etc. you’d be amazed at how common it is.

20-50k as a couple is almost commonplace. I’m generally more shocked when customers don’t have debts!!

I found finance people especially accountants from practice backgrounds to be the worst as seemed to be good at juggling it.

Kazzyhoward · 31/12/2023 13:08

Chewbecca · 31/12/2023 12:59

It's much cheaper to own a car outright and NOT replace it every few years than it is to service car finance though.
My car cost £8k in 2015, it was 10 months old, an ex demonstrator. I still have it now, it's in great nick and doesn't cost me much to run at all. I'll keep it until it does which could easily be another 10 years or so. The total cost is certainly less than car finance though we are not comparing like for like. I don't need a new car every couple of years so it would be a waste of money.

Yep, same here. Currently running one car that we bought new 13 years ago and another we bought new 8 years ago. Costs are radically cheaper than if we either leased or kept swapping every few years. Both still going strong, looked after, properly serviced, and only "repairs" have been consumable items like tyres, brake pads, battery, timing belt, spark plugs, etc. A previous car we bought from new lasted until it had 190k miles on the clock. It's far cheaper to buy and keep, rather than swapping every 2/3/4 years, whether you buy or lease.

Kazzyhoward · 31/12/2023 13:12

@baileybrosbuildingandloan

Hard to believe that none of these people have a CC, Amex, Next acc, etc tbh.

Lots of people have credit and store card accounts, but aren't "in debt" as they pay them off every month, and could afford to pay for the goods outright if they wanted to. They use the cards for the benefits, i.e. consumer protection rights, discounts, loyalty points, etc. Statistics show that 35% of credit card holders pay off the full amount every month, thus incurring no interest nor charges.

Chewbecca · 31/12/2023 13:17

Another benefit of owning your car outright is that if you lose your job and are struggling financially you still have transport without another bill to pay.

Kazzyhoward · 31/12/2023 13:19

Chewbecca · 31/12/2023 13:17

Another benefit of owning your car outright is that if you lose your job and are struggling financially you still have transport without another bill to pay.

And have an asset to sell if things get really bad! Far better than a liability of a car loan or lease you can't get out of.

StrongasSixpence · 31/12/2023 13:19

Joint income of roughly £80k and no unsecured debt for either of us (spilt finances). I earn more and have had small amounts of debt in the past for short periods. A few times taking advantage of interest free loans for large purchases and keeping the equivalent in savings until the interest free period ends. A couple of times living on an interest free credit card during short cash flow squeezes (moving house etc) then paying back before the interest starts applying.

DP has never had debt despite in the past being so skint at times he was missing meals. His is more a fear/moral issue with lending whereas mine has mostly been living within my means and only using it when it benefits me. I don't buy things I can't afford however I can afford most things I want luckily.

StrongasSixpence · 31/12/2023 13:24

Kazzyhoward · 31/12/2023 13:12

@baileybrosbuildingandloan

Hard to believe that none of these people have a CC, Amex, Next acc, etc tbh.

Lots of people have credit and store card accounts, but aren't "in debt" as they pay them off every month, and could afford to pay for the goods outright if they wanted to. They use the cards for the benefits, i.e. consumer protection rights, discounts, loyalty points, etc. Statistics show that 35% of credit card holders pay off the full amount every month, thus incurring no interest nor charges.

Yes I suppose I also 'owe' anywhere between £500-£3000 on any given month depending on what I have put on my credit card for points and purchase protection. Or sometimes take out a store card for a good offer then pay it off.

I don't really count these though as they always get paid off either straight away or at the end of the month so never cost interest. Only ever spend what I can afford to pay from current account/savings.

Wantarest · 31/12/2023 13:37

Weedoormatnomore · 31/12/2023 13:02

Out of interest how much does your car cost a month? Does it include a decent mileage allowance and servicing etc.

Show quote history

approx £275 per month.

I have a very quantitative background and work in a field (and I am of a profession) that constantly thinks in terms of cost-benefit (but not just here and now but short-term and long-term so I tend to optimise over several years in my decision-making).

It is the same tricky balancing act we all must make in terms of saving for pension, paying off mortgage many years before retirement, etc. One has to think about these things over a long consumption profile and in terms of what works for their financial situation, their risks appetite, their lifestyle now and post-retirement, whether they want to leave a legacy for their kids, and even their own views on their life-expectancy, etc.

There is a reason why wealthy people tend to finance their lifestyle by a combination of debt and equity. Likewise all countries do the same. They key is making sure you are not over leveraged, you can meet your repayment plan and you have enough savings to help when and if a rainy day comes along. It can be a good thing to use other people's money to build your own wealth. Is that the whole purpose of banks? You save your money, the bank uses your money to give out loans and makes sure what it gives you in interest on your savings optimised across its portfolio, it charges higher interest on its loans as a portfolio.

Most people who build a successful business could not have financed it straight from a pot of cash. They would have borrowed to grow their wealth.

But OP, sounds like you are over leveraged and need to bring your loan to income ratio into a position that is healthier.

Wantarest · 31/12/2023 13:39

Oh and don't forget inheritance tax, the government running down your savings for you own care should you need it, etc. You have to think about all these things and how they balance out when you are thinking about how much debt to carry (or if it is really worth being totally debt free).

doriangraybutimthepaintingintheattic · 31/12/2023 13:53

Leasing and HP is a horses for courses type thing. I have leased and although I had a lovely car, I gave it back in the end and had nothing to show for it. Just a constant stream of monthly payments. DP buys an older but very nice car and keeps them until they die or are not financially viable. In the time that I have spent £20k ish on leases he had spent £9k including maintenance etc on 2 cars and has the asset which he continues to use and will be able to use for much longer meaning over the time my cost would increase but his won't. That's cheaper.

I now have an unsecured loan and was hoping to keep the car until it died so I'm somewhere in the middle.

Weedoormatnomore · 31/12/2023 13:58

Wantarest · 31/12/2023 13:37

approx £275 per month.

I have a very quantitative background and work in a field (and I am of a profession) that constantly thinks in terms of cost-benefit (but not just here and now but short-term and long-term so I tend to optimise over several years in my decision-making).

It is the same tricky balancing act we all must make in terms of saving for pension, paying off mortgage many years before retirement, etc. One has to think about these things over a long consumption profile and in terms of what works for their financial situation, their risks appetite, their lifestyle now and post-retirement, whether they want to leave a legacy for their kids, and even their own views on their life-expectancy, etc.

There is a reason why wealthy people tend to finance their lifestyle by a combination of debt and equity. Likewise all countries do the same. They key is making sure you are not over leveraged, you can meet your repayment plan and you have enough savings to help when and if a rainy day comes along. It can be a good thing to use other people's money to build your own wealth. Is that the whole purpose of banks? You save your money, the bank uses your money to give out loans and makes sure what it gives you in interest on your savings optimised across its portfolio, it charges higher interest on its loans as a portfolio.

Most people who build a successful business could not have financed it straight from a pot of cash. They would have borrowed to grow their wealth.

But OP, sounds like you are over leveraged and need to bring your loan to income ratio into a position that is healthier.

Show quote history

Wow a lot of info thank you however only part of the answer does the 275 a month include service and lots of mileage allowance? only asking as my bought exleased car was a lot less even though 6yrs old.

Weedoormatnomore · 31/12/2023 14:13

Sugar just checked it was worse 1stJan 2020 £43,500. We where lucky as saved during Covid which all went against debt. Good luck @Cookiemonsieur you will get there.

Lotrehin · 31/12/2023 14:21

I used to have loads OP. Not as much as you but I didn't earn as much as you. It was at its height about 40% of my annual income.

I worked out a plan and paid it off in 2 years.

First put as much as I could onto low/ 0% finance and had direct debit for the minimum on those chunks. For the bit with the highest rate of interest I worked out my outgoings including the direct debit then opened a savings account and put £75 a month into it. That was to give myself a buffer so I wouldn't be tempted to take on any more debt if I was short at the end of any particular month. All other money went out beginning of the month by direct debit onto that debt with the highest interest rate. I mean absolutely everything.

After six months I saw a real difference in what I owed and I actually had a good wedge in my buffer account. When I paid off the chunk with the highest interest rate I moved onto the next one. As what I owed decreased I signed up for credit monitoring services and started getting offered decent 0% credit card transfer deals. For most of the last year I wasn't paying any interest at all and the amount I owed was going down and down. I also had a substantial amount in my 'buffer' account.

Making that last payment and being not just even but healthily in the black was an amazing feeling and what's more getting organised mentally about money has completely changed my approach to it - I have savings and I spend the part of the money I had been putting aside for debt on adding to those savings and actively making life better and doing nice things instead of spaffing it on nonsense.

Go for it OP - you will be surprised at how far reaching the benefits are.

Talkinpeace · 31/12/2023 15:24

Half of all workers in the UK earn less than £21,000
Half of Londoners earn less than £26,000

Less than a third of households have >£1000 of savings

Threads like these are NEVER representative of the real picture in the country.