[Closed] Acceptable debt?

I have 5.5K of interest free debt, but I have savings of several times that earning interest, so it is of no consequence to me. Infact if they had offered more I would have taken it.

I don't see it as debt, just as a better way to structure overall finance.

I'll get the kettle on, biscuit anyone?

I had £1000 on a credit card and £1500(ish) maxed out overdraft at one point. It wouldn't seem like much debt to many but I had just left uni and was working part time in retail meaning £2500 was almost 3 months wages in that situation. It is about how much debt you can manage compared to your incoming. I paid it off when i got a beyter job and havent got in debt since and dont plan too. You £1200 might be a months wage, might be a weeks.

Surely 'acceptable' comes down to whether YOU can afford it, and whether it is affordable? i.e. - it depends......

I've always been debt averse, so I was confused when we were offered interest-free payments on our sofas a while back.

We had the money to pay for them right then, but having established it was [i]definitely[/i] interest free and there were [i]definitely[/i] no fees - we went for the payments instead. After all, given inflation over 3 years, it was effectively a smallish discount.

Still didn't sit right with me though.

It all depends on the situtation. You may have debt now which you know you'll be able to pay off when circumstances change, i.e. child goes to school and you don't have childcare costs. You may have assests covering the cost of the debt, i.e. loan for a car which could be sold to pay off the remaining debt.

Worst situation is where you're debt is slowly rising and you've no obvious chnages coming up in the future that will get your income back above your outgoings.

We had £ 17k on an overdraft linked to the mortage, it was a lot of money and worried me although the interest on it was low and we had 15 years to pay it off. My wife wasn't so worried about it, suffice to say it's been actively paid off and due to a few lucky breaks (if you see additional redundancies that way) it'l be all gone ia few months. After that we may use the credit facility again but will be careful about what we're buying with it, i.e. not just use it to support an income vs outgoing shortfall.

Nothing other than about £3K of student debt.

For me no debt (excluding mortgage) is acceptable.

I have always saved up for anything I want. Every car I've bought I've paid cash and bought what I could afford.

I would consider interest free debt but only for something I already have the cash for. Most of these offers have massive penalties though when you miss payments so I would make sure I set up enough reminders etc.

Why pay interest if you can avoid it, and you can usually avoid it by not buying something you can't afford.

Seems this sort of view is in a minority these days - when we applied for our mortgage the First Direct lady we spoke to couldn't quite believe I had no debts at all.

I have no debts now but have had up to £1500 on short-term ODs in the past. Never EVER use credit card credit - always pay it off in full each month and also get 1% cashback on all purchases (and use it to buy every single thing I possibly can), and then whatever I can is put through Quidco too.

These threads pop up once a month and are pretty predicable.

The best posts are always from the people who are scared of debt, claiming it to be the work of the devil, yet are mortgaged to the hilt, because of course a mortgage doesn't actually count as debt 😉

Debt linked to some sort of tangible asset that can be sold if required is obviously less of a burden than spending £5k on a credit card for a holiday.

Regardless, provided you can service your debt, there is no issue. Unless of course it's just an issue you have created in your head.

Successful businesses NEED debt finance in order to operate. Unsuccessful businesses often don't manage their debt very well.

Fiscally successful people (generally) need debt finance in order to live (unless you plan on saving up for 25 years to buy a house). Fiscally unsuccessful people often don't manage their debt very well.

It'd be nice to 'only' have the levels of debt shown in the posts above. I've definitely learnt the hard way. Hoping to have the majority of my credit card and loan debt paid off in the next couple of years.

"Seems this sort of view is in a minority these days - when we applied for our mortgage the First Direct lady we spoke to couldn't quite believe I had no debts at all. "

same with RBS here

how some people sleep at night i dont know. I know there are situations where its unavoidable and sometimes its beneficial but i have friends who the fellas been made bankrupt already. 5 years later they just borrowed money from both parents to get a deposit to buy a house - 3 months ago. Now they took out a 15k secured loan to get a stupidly nice fast car.

my mind was boggled ! they dont have particularly well paying jobs either. Part of me thinks they know that bankruptcys coming again and they are going to have fun on the way down !

With the exception of my mortgage I have no debts.

I used to regaularly be up to £2k on my credit card and go from one 0% deal to the next,but made a conscious effort to clear my debts 2 years ago.

I now have a savings account where I have accumulated the equivalent of 3 months pay and try to pre plan and buget ahead for forthcoming expenditure.

Last year I paid my house and car insurance up front rather than incur the ridiculous interest rate that insuarnace compnaies levy on you when you pay by monthly direct debit.

I find Im much more settled knowing that I dont owe anyone anything and easier to budget this way.

It`s amazing how much you can save by asking yourself "will this gadget/object/bike really change my life?"

Having the right reasons and making sure it is affordable is the key. Debt for everyday expenditure makes no sense at all.

I have £5k on credit cards now after years of being debt free but we had a £20k extension on the house + the cost of all the furnishings and extras. That £5k would have taken me an extra year to save at least but as it is we have had an extra year with a bigger house and nil interest paid to date where I am paying it off over about 4 years at the current rate. Makes perfect sense.

Zero debt other than mortgage and that's manageable even if the interest rates shoot up after a lot of scrimping and saving.

I don't like credit cards hanging over me as I use them for emergencies and the idea of having a constant emergency seems odd.

A friend of mine is about £150000 in debt. That said he did buy one of those house things that a lot of folks seem to buy. Bloody expensive hobby IMO. I am about £5k in debt due to the car and a bike habit but nothing I realistically couldn't pay off in less than a year.

tomhoward - Member
I'll get the kettle on, biscuit anyone?

I would have said yes but my loan from quick quid is due to be paid this week and the APR is 4000% per day and I can't afford a whole biscuit. Can I get it on easy weekly payments?

Okay, take in the 'house thing' and I am £27k in debt. With a house worth around £300k

(Sticks fingers up at neilsonwheels) 😉

Debt really only makes sense when you are borrowing to make a worthwhile investment, such as buying a house, getting an education or starting a business (like on Dragons den when they need to borrow to get the raw materials to make something they sell for a profit).

Most of the time, its just a waste of money. Borrowing to buy a new car is possibly the biggest waste.

🙄 🙂

the other question to ask is how much of a 'float' do you have if you lose your income?
i remember a news article that said most people didn't have enough to last a month let alone 6.
i couldn't sleep at night if i had to live like that.

Okay, take in the 'house thing' and I am £27k in debt. With a house worth around £300k

(Sticks fingers up at neilsonwheels)

You must be [i]old[/i] 😉

depends on circumstances - age, responsibilities, income, etc etc

When I was younger I had only a student loan.

Then I bought a house and started working and had debts of about £5000. 🙁

Then paid most of it off. 😀

Then had kids, wife's business failed and debts soared to £60k!! 😯

Now paid most of it off and now only have about £4k outstanding. Quite happy with that 😀

(This obviously excludes my mortgage)

The only debt we have now is 2.5 years left on a house we bought for one the kids to stay at when at uni, which we now let out. Our home is now - fortunately - mortgage free
In the past though we've had some uncomfortable levels of debt.

To answer the OP though, I reckon 2 months salary [excl mortgage] is the limit of personal debt I think I'd be comfortable with

the other question to ask is how much of a 'float' do you have if you lose your income?
i remember a news article that said most people didn't have enough to last a month let alone 6.

I think that's probably true of most to be honest.

£60k debt??? Congrats on getting that sorted out! That's huuuuuge!

Went from about £7000 this time last year to £0 now. Can't really what I bought to end up maxing out all the credit cards. Probably bike related.

I seem to have everything I want now though so planning on putting roughly half my salary into my mortgage every month from now on.

Edit: by that I mean the regular payment plus half my salary on top of that. I enjoy living well within my means 🙂

when I was in my early 20s I ran up a fair amount of debt, intact I was pretty reckless. But one thing that actually did pay off was buying a house and using cash back from several credit cards to raise the deposit.

It took me a further 3 or 4 years to clear that and all my other debt, car loans etc and I kind of kept gambling on increase in asset value in shares and property and promotion at work to pay off and help tip the balance. Fortunately they all did.

You must be old

Non-mortgage debt? Zero. Both of us believe that spending money you don't have is inherently wrong, and whilst there are situations where you can get away with it, it's too easy to end up dropping the ball and getting stung.

Mortgage? Neccessary evil. We've budgeted things such that if one of us loses their job, we can still continue to pay it off at the same rate (although things would be very tight). We do have a lot of equity to play with too.

Float? Some. Not as much as I'd like, without raiding my ISAs. That;s partly down to buying an expensive house 9 months ago. Fortunately, so long as I can afford to splurge on liability insurance, I can make reasonable money doing my job as a freelancer.

~20k Student Loan.

Depends why you are in debt more than how much?

Bought a bike on a card? I wouldn't, I'd save up or buy something cheaper.
Bought a car, well not many people have huge amounts of cash so a loan might be the only option.

Hi
The way I look at is that it only becomes debt when you cant afford to pay it.
If you can then it is credit and that is completely different.
I have no debt but I have various forms of credit, all of which I can pay (at the minute!!!!) 😀
Cheers
Steve

£10k all on Santa Cruz bikes! 😉

Seriously, debt is kept as low as poss excl mortgages, i save and i invest as wisely as i can.

A student is going to leave Uni with up to £50k in debt now.

I left law school with about £40k of debt.

It was a necessary cost, I wouldn't have been able to go otherwise. Plus it wasn't like I had decided to invest £40k in a degree which would result in a £15k per year job. It was a shrewd investment financially, although I still wish i'd studied astrophysics instead 🙁

£40k of student debt - the mind boggles. Even with inflation I hope the quality of teaching has gone up for that since I left Uni 20 yrs ago where the first student loans were something like £600 a year and a student bank overdraft £300.

Scamper, most of mine was in fees, not student loans being pissed up against a wall.

Undergraduate LLB was pretty good.

Postgrad professional exam courses (GDL + LPC) etc were pretty poor quality, but required by the Law Society, and cost £12k per year in fees 🙁

An English student is going to leave Uni with up to £50k in debt now.

FTFY. 😀

I'll be moving back up to Scotland* before my daughter reaches uni age.

* (granted it may well be [i]"The People's Democratic Republic of Alba"[/i] by then)

£0.00

If you want something - save for it - old fashioned, I know.

No one will give me credit even if I wanted it (which I don't)

I think it really depends on so many factors.

Right now - I have zero debt. Its good but I am not righteous about it.

But in the past I have had some debt - maybe up to £10k - but these debts have enabled me to get to where I am today, especially useful coming out of university. Without the extra cash I honestly don't think i would have been able to get to my position today.

But I always stuck to one rule - if I could not seriously buckle down and pay it off in a year then it was too much debt.

I don't think student loans can be seen as 'normal' debt as there are conditions around when you pay it back, the rate and time period.

It's better seen as a time limited graduate tax isn't it?

Still owe my father-in-law 3 payments of £275 for some money I borrowed for my car, I just about manage to sleep at night!

I needed a car (old on needed £1k of work to get it through the MOT) a good mates Dad was selling a really well looked after example of the car I wanted and my FIL offered me the loan interest free over a year.

All worked out very well for me really. Aside from that I have a credit card which I clear each month and no overdraft, same for my wife. I could have debt, but I don't really find I need to - and yeah the mortgage is more than enough in reality.

It's not like I go without either I have plenty of 'stuff' I just also earn enough to pay it off each month.

I would prefer to be overpaying on my mortgage too though, so it's not like everything is perfect.

Debt is not bad. [i][u]Bad[/u][/i] debt is bad. If you get my point.

I can "afford" to pay off my debt several times over with my savings. If a CC is going to offer me 0% for the debt I have for 18 months I'd be stupid not to take it. The savings are earning more interest than the debt costs.

Wonga.com and the rest of the loan sharks are vulture scum of the highest order. But some people don't think they have a choice.

There are a lot of people with large mortages that preach no debt to others. [i][u]If[/u][/i] I owed 100k or more to a bank that can, and did to someone I know, call in that debt with 30 days notice, I wouldn't be able to sleep at night.

I'm with Mr Micawber

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

For those who only know pounds and pence this refers to the old pre-decimal currency. I am old!

If I owed 100k or more to a bank that can, and did to someone I know, call in that debt with 30 days notice, I wouldn't be able to sleep at night.

What's the alternative though? How much notice does a landlord have to give you when you are renting? Does having no house to call your own help you sleep any better?

I was happy with £800 on my interest free CC. Then I went away for work and missed the payment date. So now I'll be paying interest on it and that's unacceptable to me!
(I think I'll borrow out of a savings account and pay it off.)

What's the alternative though? How much notice does a landlord have to give you when you are renting? Does having no house to call your own help you sleep any better?

I'm afraid it's the bank's house until you've got rid of that charge by paying off your mortgage. Sleep easy won't you 😉

renting tenants have considerable protection from being removed from a property (much to the dismay of most landlords)

renting tenants have considerable protection from being removed from a property (much to the dismay of most landlords)

Odd that folk aren't afforded the same protection from banks - since they are effectively letting [i]"their"[/i] house to you too.

Odd that folk aren't afforded the same protection from banks - since they are effectively letting "their" house to you too.

😀

Odd that folk aren't afforded the same protection from banks - since they are effectively letting "their" house to you too

Who said that mortgagees were not afforded a similar protection to lessees?

The point I was making is that you'll be out on your backside if you fail to keep up rental or mortgage payments, and that tenants are afforded substantial protection from landlords being able to boot them out on a whim.

Stop paying your mortgage and see what happens. It's pretty similar to what happens if you stop paying rent.

Yeah but according to bigblackshed above, the bank can just "call in that debt with 30 days notice" which sounds unreasonable and isn't something a private landlord could do.

The point I was making is that you'll be out on your backside if you fail to keep up rental or mortgage payments, and that tenants are afforded substantial protection from landlords being able to boot them out on a whim.

Stop paying your mortgage and see what happens. It's pretty similar to what happens if you stop paying rent.

You went to Law School right?

how ever bigblackshed was suggesting that his mate was just turfed out

if you dont service your debt then you dont deserve to keep the asset - i have no issue with that !

A student is going to leave Uni with up to £50k in debt now.

It's not normal debt though.

I don't have a problem with the concept of debt. You're paying for a serivce that lets you get what you need or want, when you need or want it.

Irresponsible borrowing is another issue, but there comes a point when I'd rather pay 20% more for something than go without for two years.

I'm afraid it's the bank's house until you've got rid of that charge by paying off your mortgage.

No, it's yours, it's just collateral for the loan.

Otherwise it wouldn't be reposession if you defaulted, it'd be eviction.

You went to Law School right?

Are you suggesting that banks in the UK don't repossess homes on default?

[url= http://www.bbc.co.uk/news/business-18018420 ]9,600 homes repossessed in first 3 months of 2012[/url]

No, it's yours, it's just collateral for the loan.

Otherwise it wouldn't be reposession if you defaulted, it'd be eviction.

A was being a little bit facetious to emphasise the point that just because your name is on the title deed, doesn't mean that your immune from being booted out of [i]your[/i] house, as the figures quoted above would suggest.

Not sure anyone thinks that you are!

Are you suggesting that banks in the UK don't repossess homes on default

Of course they do, but your implication is that banks will repossess a home at the drop of a hat and that private landlords will have to jump through hoops of fire before they can oust their problematic tenants.

The reality is that the mechanisms in place to assist home owners struggling with their repayments are far reaching and banks will do a great deal to keep mortgage payers in their properties paying (something).

Landlords don't want none payers or difficult payers and as you certainly know the Law more than recognises this fact. Whilst it's not easy to evict tenants there are very straight forward mechanisms in place for landlords to remove none-payers and very useful and adaptable mechanisms for mortgage payers who are struggling to remain in their homes.

I'd much rather be a home owner than a tenant.

The reality is that the mechanisms in place to assist home owners struggling with their repayments

Tenants would argue you aren't a home owner yet...

Indeed they would.

A student is going to leave Uni with up to £50k in debt now.

Yes, [b]A[/b] student, the average will less.

As for the original question, no debt for me unless you're being picky in which case stuff like phone contracts are effectivey credit as you've promised to make the payments in the future. Apart from student loan which I've more in savings than the outstanding loan but that's accuring intrest at a comparable rate to the loan and will be better put towards a mortage deposit at some point.

You can't talk about Debt and then say that we aren't counting mortgages. Mortgage debt is still debt but as others have suggested its more "good" debt than "bad".

I have a 115k mortgage left, a 0% credit card paid off in full each month (i use it for the benefits it provides) and will have around 13k of student loans in a years times.

I wish I had realised how cheap my student debt would be as its cheaper than my mortgage. I could have moved the mortgage debt to the student debt and saved myself quite a bit of interest in a few years time.

0 debt apart from mortgage. There is a very good reason people wish to lend you money. If you can't suss that one out put your head in the oven now.

You can't talk about Debt and then say that we aren't counting mortgages.

It's my thread and I can make whatever rules I like. 😉

[b]The Bank:[/b] It's my house and I can make whatever rules I like.

There is a very good reason people wish to lend you money.

Yes, but there is also a very good reason I pay people for all kinds of services, of which lending is just one.

I can't really understand what some people have against having debts. It's the basis of any society. You do something for me, I'll do something for you in return. Hardly something to loose sleep over.

Obviously having debts you can't pay back (whether money or anything else you might owe) is a bad idea, but otherwise borrowing is extremely useful for everyone and enables a large scale economic machine to work.

I'll own up to being in a large amount of debt with nothing to show for it, a lot of it due to charges from burying my head in the sand and being scared to deal with it, a lot of it from just being stupid.

Have no float, no pension, renting, no investments. However I refuse to go down the route of bankruptcy/IVA: I caused the problem, I'll sort it.

Looks like I'll never have a mortgage though, and will be able to start paying into a pension at about the age of 70 or so...

I bet you there's more people on here in a similar situation than would openly admit to it.

I'd love to be debt free but realistically it's never going to happen.

GrahamS - Member

What's the alternative though? How much notice does a landlord have to give you when you are renting? Does having no house to call your own help you sleep any better?

Housing Co-op. Affordable rent for life. And no I'm not glouting, you haven't met my neighbours.

The single mum who was turfed out after 30 days, no default, no missed payments, husband just walked out leaving her with a reducing overdraft type mortage, (not really sure what it was called, not an expert), which the bank felt she was not able to manage to pay.

As it turns out most mortages have the 30 day clause in them, but obviously it's not in the best interest of the bank to use it, they would loose the future years of interest payments and with low priced houses hitting the market, as a result of people off loading property, they are not going to be able to sell big mortages.

Incidentally, after the fallout and her getting herself back on her feet, her husband then dicided that he'd "like to come home". 🙄

Of debt and personal finance in general, this book explains it in simple terms and has nice story to go along with it too:

The wealthy barber
[url= http://www.amazon.co.uk/gp/product/0761513116?ie=UTF8&ref_=aw_bottom_links ]Amazon link[/url]

Can thoroughly recommend it.