Why ARE people in so much debt?

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  • why are we in debt??

    Because its so darn easy thats why!

    I left home, from an abusive background at the age of 16 and set up home with my partner. I was determined to get my A Levels so only worked part time, and he was at uni.
    Neither of us got any help from our families, and bought things we needed (fridge, clothes, food, tv, etc) on credit naively believing you could just pay the min payment and things would be grand.

    Add on top of that me being diagnosed with depression and panic disorder and being unable to work, and my partner trying to set up his own business which then failed, we accrued more credit.
    Also no help being given to be from the state ie NO incapacity benefit haven't enough national insurance, NO income support as hubby works full time and lives with me (if we were single I'd b in luck, seems you get punished these days for being married or not being a teenager with a baby) NO dla as apparantly i can go to the toilet on my own so i'm not disabled (even though every other section on the form was filled in) and NO jsa because i'm not actively seeking work. All this led to us lending more/spending more credit just to live.

    It does just get on top of you and swamp you, half of what we owe is interest and whilst I don't want to push the blame I do think it needs to be shared with lenders and creditors who take advantage of 18 year olds.

    Thats my 2 cents then lol!!!
  • Pooky
    Pooky Posts: 7,023 Forumite
    Combo Breaker First Post
    Just thought I'd throw this in.....

    Take me as I stand...a 31 year old mother of 2 with no property, no assets of any kind and no employment when these limits were set.

    Do I sound like an attractive proposition to lend money too??? Most of you will be saying "NOOOOOOO".... Credit card company's however, BITE MY HAND OFF!!!

    I've been doing the creidt card tart thing - swapping for the 0% cards when needed and am astounded at the level of debt I could have if I cared to be that reckless....


    HSBC Gold Card --I didn't ask for a gold card - just a standard one with a 0%..... credit limit £10600.00.

    Barclaycard .... Offered me a limit of £3000.00 (only offered hubby who earns good money £200 limit)

    MBNA Platinum Card - Credit limit £4600.00

    Catalogue Companies - 2 companies - combined limit £6600.00 - balance nil (not paying their rates of interst thank you very much)

    Natwest - Overdraft limit of £1200 and personal loan limit of £12000.00

    Now I dont use any of these but am still astounded at the lunitic level of debt they are willing to take from me.....WHY???? why would they give me that much money when they are all aware that I have NO income.

    I think there lies the problem with todays money spending habits -- it's there for the taking!
    "Start every day off with a smile and get it over with" - W. C. Field.
  • culpepper
    culpepper Posts: 4,076 Forumite
    credit card and loan companies are happy to lend to people who have 'assets' (mainly property) because should you default, they hope to get the property or for it to be sold to pay off your debts.As far as they are concerned you are loaded. Of course that is rubbish as most of us live in our 'asset' and the last thing we want is to be homeless.Most of us are still paying our mortgage so realistically we dont even own our 'asset', the mortgage lenders do.
  • ffs
    ffs Posts: 292 Forumite
    First Post First Anniversary Combo Breaker
    I've posted this before on this board, but I think it answers your question, so here it is again:

    My argument is counterintuitive, and took me several years to appreciate. Most of the advice on this site is about saving money, which is great, except that is not always in our best interests. How can that possibly be true?

    Because credit is very similar to other addictive consumer products. It is similar to drugs in as much as once you use it regularly, it becomes impossible to envisage a world when you can't use it.

    It is similar to food in that the cheaper it is the more you consume, rather than the less you spend. The developed world is not saving money because food is cheaper than ever before, instead it is eating more and becoming obese. The same is true for credit.

    Cheap credit, by which I mean credit that enables you to repay a relatively small amount per month (which is often the same as low interest rate credit, but not always) will allow people to borrow more than expensive credit. This is because with expensive credit you run out of income more quickly and either stop borrowing, or default preventing further borrowing.

    Thus if only expensive credit is available the less your total debts are likely to become, which also makes it more likely to be able to repay when windfalls occur. But most people don't get in to problems with their debts, do they?

    Well I'm not so sure, certainly most people using this forum are likely to be able to use cheap credit to their advantage (by stoozing etc) but obviously this isn't the case in the general public, otherwise the companies offering credit that MSE readers take advantage of would not be profitable.

    In other words, it's only because most people can't save money in the way that is promoted on MSE, that these low cost credit deals exist.

    These low cost deals always used to encourage consumers to increase their total borrowing. They are the freebie that the drug dealer offers knowing that soon enough the consumer will be back for more, and more, and more.

    I don't expect many people to agree with me, but I believe the figures speak for themselves. Total borrowing in this country is higher now (allowing for inflation) than ever before, and cheap credit is easier to get than ever before.
  • Magentasue
    Magentasue Posts: 4,229 Forumite
    I agree with you !!!!!!, I was never in debt when I couldn't afford credit!
  • bunking_off
    bunking_off Posts: 1,264 Forumite
    Perhaps there's a failure in the education system here. It's probably true that a large proportion of the population don't understand interest rates. I did an MBA a few years ago, and it was striking that a lot of the folk on the finance module had difficulty getting to grips with compounding.

    Isn't there a case that part of school education should be to teach our kids about managing household finances, and the consequences if things go wrong? There are many people who fall into debt because of circumstances that they're not directly in control of (I consciously don't use the term "out of their control", because these days redundancy is a fact of life, and in planning finances we all have to at least give a nod to the worst case scenario). However, there do also seem to be people who get in a mess because they buy into the fantasy sold by lenders that advertise on daytime TV... Financial knowledge is undoubtedly "boring" to the average spotty youth, but if they at least take some of it in it would help them in their adult life.
    I really must stop loafing and get back to work...
  • tiff
    tiff Posts: 6,608 Forumite
    First Anniversary Combo Breaker Savvy Shopper!
    I think a lot of people get into debt due to bad management of their finances. We didnt used to budget, we just spent our money as we wanted (not buying designer stuff or the biggest and best) and if there wasnt enough money at the end of the month we went into overdraft. When the overdraft limit was up we used the credit card and so on until we were in a lot of debt.

    We didnt know how to manage our money, we are doing a lot better now and we live within our means in order to pay off our debts, ie we buy clothes in charity shops, cut our bills by moving to different suppliers etc. A big lesson was learned just in the nick of time, a lot of our friends and family dont understand why we live like we do, ie we have an unfinished bathroom because we took off the tiles when we were in debt but then couldnt afford to finish it. It has been this way for a couple of years, but I'm pleased to say we are having it done in the next couple of weeks due to a bonus from my husbands work.

    I just wish we had looked after our money sooner.
    “A budget is telling your money where to go instead of wondering where it went.” - Dave Ramsey
  • ceegee
    ceegee Posts: 856 Forumite
    My house contents have been totally mismatched for 19 years. I must have lead a sheltered life because I had no idea that some people considered that having matching kitchen appliances was so important. It had never even occurred to me! Not only do my appliances not match, but my plates, sideplates and bowls etc. are a complete hotchpotch, I have 4 of each and they are in 4 different designs! Doesn't affect the taste of the food though! Then there is the totally mismatched furniture. It's all clean and the fact that it is all "odd" does not affect either it's comfort or it's usefulness.

    Nor does any of this mismatching prevent us from being a really happy and loving family. If we had the money to have everything matching, I don't think I could be bothered to go out and do all that shopping anyway!
    :snow_grin"Let it snow, let it snow, let it snow........":snow_grin
  • Norma_Desmond
    Norma_Desmond Posts: 4,417 Forumite
    Good on you, ceegee! I'm an auction addict when I need anything 'new' and a few weeks ago managed to get a full Victorian 6 setting dinner service for the grand sum of £8!
    "I'm ready for my close-up Mr. DeMille...."
  • Austin_Allegro
    Austin_Allegro Posts: 1,462 Forumite
    Combo Breaker First Post
    Ceegee has made a good point. As an aside, I wonder if people realise that matching furniture (suites etc) only became fashionable in the 20s-30s, at a time when cheap credit was becoming widespread. Basically the whole concept it designed to make people buy more! Up until the 50s-60s in most homes it was perfectly normal and acceptable to have old, mismatched furniture (that was built to last, unlike modern furniture) and this is still the case in most historic, aristocratic homes - so it's certainly not a sign of poverty.
    'Never keep up with Joneses. Drag them down to your level. It's cheaper.' Quentin Crisp
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