Over-indebtedness in britain

carolt

I'm going to disagree - with all of you.

When first married, with a baby, we built up debts on credit cards. Our earnings at that time were v low, as my earnings shrank hugely due to baby, and OH was lowish in his job at the time. We both knew (a) that starvation was not an option and (b) that as we earned just above national cut-off points but were working, and not on benefits, we would get zero help from the state (this was the days before tax credits, and the married couple's allowance was abolished...the year we got married ).

We were far from spendthrift - we were incredibly frugal. But too proud either to go begging to family or on benefits.

So we first spent through our savings, and then started borrowing on cards/overdrafts. We both knew our earnings would rise in the future. Which they did.

In fact, sadly, my OH's grandma died a couple of years later, and we inherited enough to pay off the debts, and some. And we stopped being quite so desperately poor. Plus my OH got several promotions, and now earns c 3 X what he did then.

But we weren't lazy, or spendthrift.

We were just POOR.

I think less comments like 'everyone with debts = stupid" would be sensible, really. Not everyone gets into debt because they have too many shoes, you know. Some get into debt so they can pay the gas bill, the council tax bill...oh, and let's not forget the credit card bill, with rates of 20% plus these days - bizarrely PUT UP when credit card companies think the card user is a potential debt risk - I've never quite understood why putting rates up in that situation is supposed to make it EASIER for the person at risk of defaulting to stay solvent and pay down the debt???!

Surely the logical thing to do in that situation is to REDUCE the interest rate, so they can actually pay down the debt?

Hmm. I digress.

But anyway, I hope my point is clear.

Ingsy

Carol, if the credit card companies reduced the interest rate for people who couldn't pay then they wouldn't make any money.

Credit card companies must hate people who pay the balance off in full, as they make virtually no money - only the 2% or so that they charge as comission of whatever when people use the card in the first place.

carolt

Ingsy wrote: »

Carol, if the credit card companies reduced the interest rate for people who couldn't pay then they wouldn't make any money.

Credit card companies must hate people who pay the balance off in full, as they make virtually no money - only the 2% or so that they charge as comission of whatever when people use the card in the first place.

Oh no, bankers might be slightly poorer.

How tragic is that.

lemonjelly

I don't disagree with you carolt. People need access to affordable credit. My arguement is that they need to know what they are letting themselves in for, what it will cost them, & how best to access & use credit.

I'm aware that my client base is a proportion of the populace, & that I don't see the many who cope without difficulty day to day.

But more understanding, by all, would be helpful.

I don't argue credit/debt is bad.

I do argue banks/creditors lend irresponsibly.

But there is a noticeable increase in irresponsible/reckless borrowing too. We need to counter that, & I think that to counter it effectively we need a social change.

lostinrates

carolt wrote: »

Oh no, bankers might be slightly poorer.

How tragic is that.

No, bankers wouldn't be, banks would be, I imagine. On the plus side, the lending crierior would also be stricter: the fees are partly to cover unrecoverable losses I guess...

abaxas

lemonjelly wrote: »

People need access to affordable credit.

Why do they for anything other than huge ticket items. The only two I can think of are cars and property.

Using credit for anythning else just proves their inability to exist.

lostinrates

Ingsy wrote: »

I'd be interested to hear about the financial education people are mentioning - how would it work exactly? And what would you teach?

I'm crap at working out interest rates. I'm not even sure I could do it in my head. AER & APR? No idea of the difference.

However, I'm not in debt. Well, student loan and sensible sized mortgage. I save up for stuff. Only put stuff on a credit card that I know I can clear at the end of the month.

The point I'm making is that "we must have financial education!!1111" doesn't really say a whole lot - and I'm not convinced it's the right thing to do. Surely it's a whole lifestyle change that's needed instead?

a lifestyle change with no understanding is probably little better. It would simply trap a lot of people who need not be. If we all understood the basics and had access to understanding a little more then perhaps the lifestyle change would be a natural consequence

lemonjelly

abaxas wrote: »

Why do they for anything other than huge ticket items. The only two I can think of are cars and property.

Using credit for anythning else just proves their inability to exist.

Loads of things. Why is credit available for washing machines, tumble dryers, fridges, freezers, tv's?

Answer - because most people don't have access to a lump sum of cash to buy these goods outright straight away. & in the cases of some items, you need them straight away - washing machine being the best example. Ask anyone with kids...

I'll say again, the debt isn't the problem. The issue is about sustaining regular repayments. If something upsets that balance, that is where you have a problem.

Education should help prevent things like overstretching yourself too far.

carolt

abaxas wrote: »

Why do they for anything other than huge ticket items. The only two I can think of are cars and property.

Using credit for anythning else just proves their inability to exist.

See my post.

So what do you suggest for those who, acc to you, have proved 'their inability to exist'?:eek:

Let them starve?

Thrugelmir

carolt wrote: »

In fact, sadly, my OH's grandma died a couple of years later, and we inherited enough to pay off the debts, and some.

Then you were fortunate. Many aren't.

In fact you illustrate another trend of people banking on inheritances ( primarily assets in the form of property) to clear their lifestyle debts.

My comment wasn't directed at you in any form.

As for financial education. Many are going to receive direct education through their own lifestyle choice. Hopefully the lessions they learn will be passed onto on the next generation.