Is this really as bad as my friend thinks?

bobmonkeydog

Hey,

We are currently on our debt free journey. At the start we owed well over 30K but by sticking to our plan we should be credit card free by end of 2014 with our unsecured loan ending 6 months later so 2 and a half years till Debt free day!!!

We were having a discussion about debt with some friends recently and one of our friends was shocked by how much we owe on credit cards(14K in fact) describing our situation as 'terrible'. I know we owe a fair bit on credit cards but I do not view our situation as 'terrible' for the following reasons.

8K is interest free
the remainder is fixed at 6.9% for the life of the balance.

We make our payments ( including huge overpayment) without difficulty and we are sticking to our debt plan.

I know that 14k on Credit cards is a lot of money but surely it is slightly different if interest free and there is a structured payment plan in place ( self imposed in our case - so IVA or anything like that)

We also earn about 60K a year between us so surely income has to be taken into account?? If only one of us was in work or if we were on low incomes with astronical rates of interest to pay then I would be far more concerned!

Am I just in denial and is my situation really 'terrible'??? Feeling a bit stressed about it now whereas before I felt positive that we were sorting it.

moohound

You have a solid plan in place and are not paying loads of interest, I don't think it's that bad, so long as you have learned from the experience and won't run them up again.

timetogrowup89

I don't think its that bad. You have already started making overpayments through choice...

My accounts had to be passed to dca before i realised the importance of good financial planning..

It sounds like you pay a fair amount each month, so think how much spare you will have when the debt free date comes round :-)

Matt2389

Hi, I think it really varies!

For some people owning £500.00 on an overdraft is terrifying and keeps them up at night, as they hate the idea of owning anything!!

14K a substantial amount BUT you really do seem to have things organised, as you said the interest rates are 0% or low and both you and your OH are in well paid jobs. That might make some question why you got into the debt in the first place, ha, but that's not important right now...

In answer to your question, you seem to have your head screwed on and perhaps your friends aren't aware of your full situation...maybe the thought of 14K to them is truly terrifying because they aren't as fortunate as you, I don't know! ... But 14K is sill £14,000.00 lol.

Try and sleep well!

InsertWittyName

No, it's not terrible in the slightest.

I'd hazard a guess that those same people wouldn't have batted an eyelid if it was £30k of car finance.

michelle2008

To someone who doesn't have credit card debt it does sound quite a lot.

People see mortgages as acceptable, even sensible, debt - car loans etc as not so great but sometimes necessary and credit card debt as a sign you haven't managed your finances.

You know its not ideal, but You have a plan to repay it, and you are not getting any deeper, so what does it matter what your friend thinks!?

suburbanwifey

I think it all depends on how you think. Terrible is not quite as bad as I would describe owing 14k on credit cards. That's what I borrowed on my first mortgage to buy a 2 bed flat so owing that on cards would be horrific to me! I constantly get deeply shocked by how many thousands people on here owe just on credit cards. If I owed that much on cards I would not be able to sleep at night. Owing 30k and I think I'd rather be dead but that's my personal view of debt to that level, especially when it's not to buy a house or something worthwhile.

I also wonder why on a salary of 60k between you, debts to that level can or need to be ran up. 14k would scare the devil out of me!

guesswho2000

I wouldn't worry, if you're managing it, you're managing it, does it matter what others think?

FWIW, I don't think it's particularly bad at all, you're making headway into paying it off, it's not a huge amount on that combined salary, and you aren't missing payments etc.

This is especially the case with the debt you carry at 0%; I'm currently sitting atop some 0% purchases, purely because it's not beneficial to pay it off - even with interest rates as they are, 2.5% is a gain when you're being charged 0%, so keep the money until the promo expires.

CLAPTON

depends upon why you have the debt


-business
-property
-assets
-holidays
-just junk

guesswho2000

michelle2008 wrote: »

...credit card debt as a sign you haven't managed your finances...

Disagree with this, with the 0% offerings available on credit cards these days, it's still profitable to hold "debt" even with interest rates as they are.

bobmonkeydog

Thanks for the replies guys. our salaries have increased significantly over the last 2 years due to promotions etc.

The debt was built up due to house repairs, plugging the income gap during maternity, car repairs and then a spot of good old fashioned over spending!

We are now in a position to clear things and we are working hard to get unsecured debt free. We are then going to use the extra money to move to a bigger house which will need a bigger mortgage. This is our incentive to pay it all off.