How much debt do you think is "ok"?? If any!

Delree

Willing2Learn wrote: »

For me, I consider the risk to be the primary factor. I constantly get loans just to keep my credit file ticking over. But it's money I don't need. Whatever I spend the loan on I could afford without the loan. If I take out a loan I want to know that if I lost my employment or became sick, I could instantly pay off the loan with cash and not be at risk. I learnt this lesson the hard way a few years ago and will never borrow money again using a repayment schedule which uses projected income to calculate affordability - It just hurts too much if personal circumstances change.

(Edit: I suppose the only exception to this rule would be a mortgage due to the potential long-term benefits)

Surely this is an expensive way to keep your credit file looking good? You must surely pay some interest.

Also companies factor in outstanding commitments when deciding upon credit applications so you could inadvertently shoot yourself in the foot.

Why not just carry a balance over on your credit card each month and pay in full. That keeps your file ticking over just fine.

Ilona

Willing2Learn wrote: »

For me, I consider the risk to be the primary factor. I constantly get loans just to keep my credit file ticking over. But it's money I don't need. Whatever I spend the loan on I could afford without the loan. If I take out a loan I want to know that if I lost my employment or became sick, I could instantly pay off the loan with cash and not be at risk. I learnt this lesson the hard way a few years ago and will never borrow money again using a repayment schedule which uses projected income to calculate affordability - It just hurts too much if personal circumstances change.

(Edit: I suppose the only exception to this rule would be a mortgage due to the potential long-term benefits)

Seems a bit bonkers to me. You borrow money that you don't need :huh: I couldn't care less what my credit file says, because I am never going to borrow any money.
Ilona

beth3735

In my eyes no debt is the best amount, But thats because im not on a huge wage due to part time working around the children, and once this debt is paid off i could afford to give up my part time work as my wages 100% go towards my DMP. BUT i do enjoy my time at work with adult conversation, plus it will be nice to have that DMP money to save for a family holiday.

We will have a mortgage though when i declare myself debt free at the end of this year and will have that mortgage for another 22 yrs as we took out a 30 yr one. We were only young taking it out so if all goes to plan we will be fully debt free when im 52. Like the sound of that.

I did look at maybe getting a loan to take kids to Florida as memories are priceless and they are at a fantastic age now, but the thought of a loan is enough to put me off and think sod it will just save to take the grandkids lol

Thrifty_Pixie

after many debt-filled years i have come to the conclusion that the only debt that is 'ok' is a mortgage, as that is something that, realistically, most people will never be able to save outright for.

since paying off my debts (all £12k of them) i have drastically changed my financial ethos. now if i want something i save for it. also i am no longer embarrassed about talking about money or care what people think of my home/car/clothes. knowing that i don't owe anyone anything, apart from the mortgage that i am overpaying on and a credit card that i pay off in full each month, is one of the most liberating things ever. and paying cash for something and being able to enjoy it without the shadow of the debt it's created is magickal.

egoode

The only real debt I've ever had is a student loan and the way the Australian System works I only pay it when I earn a certain amount while in Australia so while I'm in the UK I don't have to pay anything on it, so it's not like a normal debt you 'have to' pay back within a certain time frame.
I've had credit cards mainly just for frequently flyer points and to have some sort of credit history however they are usually paid off in full each month. I think over the last 14 years there's been the odd occasion I've not paid the full amount but it's usually only like that for a month or 2.
I'm currently looking for a place to buy so will soon have a mortgage however I will have a 15% deposit and planning to overpay from the start and aiming to be mortgage free in 15 years.
I must admit from a young age I've always been a saver and would even save up my pocket money from my parents when I was 5. When I was 16 my Mum had borrowed over $1000 from me which I had mainly saved from working at McDonald's for $4.50/hr! So for me I think I'm happy with only having a mortgage and student loan debts, everything else if I don't have the cash then I don't really need it.
I've already decided that when I'm furnishing my flat I'll only buy the furniture as and when I can afford it so it will be pretty empty to start with. Initially I'm planning on only buying a fridge/freezer, washing machine and sofa bed. I might try and see if I can get other items via freecycle but if not I'll just do without until I can afford what I want.

Willing2Learn

Delree wrote: »

Surely this is an expensive way to keep your credit file looking good? You must surely pay some interest.

Also companies factor in outstanding commitments when deciding upon credit applications so you could inadvertently shoot yourself in the foot.

Why not just carry a balance over on your credit card each month and pay in full. That keeps your file ticking over just fine.

You totally missed the point by focussing on a six word sentence within my post.

The point I was making was risk. Why expose oneself to financial risk? Why, for example, take out a 20K loan for a new car and home improvements when the repayment plan could be unaffordable should circumstance such as employment or health change (ie worst case scenario)?

What I'm saying is that credit should only be used if there is little or no risk of financial hardship and default should the debtor have their income reduced. The debt should still be within budget on a lower income. If it is not, then there has not been an effective analysis of risk before taking out the credit and entering into an agreement. That would then, in my book, be an example of poor financial and budgetary management.

People get themselves into trouble by not identifying risk. A recipe for disaster.

uk_american

tomahawk wrote: »

I have something inside me that just wants me to have as little debt as possible, and any that I do have, to be justified to a degree.

I agree with your statement here, and I have no debt, partially as a reaction to growing up skint with parents always arguing about money, and partially because I spent many years around 3 grandparents who were the product of the great depression ('don't buy it unless you can pay cash' was the mantra).

That being said, life is full of choices. I chose to live in a shared house for 4 years in my 20's to minimize bills, even though I would have preferred my own place. I chose to work overseas as it was financially lucrative, even though it was rough going at times, being in a different culture and far from home.

I did choose to take on a student loan, as I found that to be 'good debt', as it would help me to increase my earning potential.

That being said, I did these things so that I would be able to afford to buy a place mortgage-free, which I did, at age 34. (Granted, it's a tiny one bedrm flat, but it's a perfect starter home which is enabling me to save up for a larger place or for wherever life takes me.)

It's all a matter of deciding your priorities. I also never had a new sofa.

It's certainly possible to be debt-free or have just manageable mortgage debt, and if that's what you'd like to do, it's just a matter of putting your energy toward that and deciding where your spending should go to best further your future.

ValHaller

I have only ever borrowed other than 0% finance for cars and houses. I last borrowed for a car in 1986 and have always bought cash since.

I would not buy furniture on credit - it does not bring in money - it is just nicer to sit on than what you might sit on anyway. I have done without a car for 2 years in order to keep on top of a mortgage - the next 2 cars I took a personal loan for one and 0% finance for the next - on the basis that they provided access to employment.

Oh, yes I have a credit card, cleared every month. Mainly for the protection on purchases.

ValHaller

Willing2Learn wrote: »

I constantly get loans just to keep my credit file ticking over. But it's money I don't need. Whatever I spend the loan on I could afford without the loan.

I really do not see the least benefit in this. I have already posted about my borrowing - I have not had credit since 1987 apart from a 0% furniture deal in 1998. And I have always had more credit available to me than was ever good for me. I could probably borrow more than a year's pay by the end of next week

ValHaller

missindecisive wrote: »

.... I myself am happy to drive an old banger, I dont owe anyone a penny for it and I have break down cover should I need it (Ive relied on this cover once in the last 15 years). Im not bothered about my car reg or that its not sparking new, the radio is iffy and it creaks but its reliable!)
However, there are some very sad people out there who judge your wealth (or lack of it) on the car you drive

Well, sad person that I am, I judge people's debt by the car they drive ...

The people with the least apparent wealth without being obviously poor are those with real wealth IMO. Partly financially because they don't have debts - and partly on quality of life because they have less to worry about.