What is debt free to you??

charmed1318

jaydeeuk1 wrote: »

Simple. Its where your assets, cash house and car, are worth less than what you owe.

If you have a £100k mortgage on a house worth £110k, you are not in debt.

Shouldn't that be, 'worth more than what you owe'

166million

I consider myself debt free but have an old student loan which they take off my payroll. Anything on top of that I would no longer consider myself debt free

HappyMJ

Debt free to me is having a positive net worth. A mortgage debt worth less than the value of the house is OK. A loan for a car would be OK if the car could be sold to repay the debt but is needed to get to work to earn money. A business loan could be OK if the business is earning enough money to pay for the loan and still create profit. A credit card debt used for essentials such as groceries and non essentials such as a holiday would be a bad debt. A credit card debt balance transferred to a savings account to earn more interest than the fees charged can be a good debt as the cash can always be used to repay the credit card. A payday loan is just about always bad. A student loan taken to invest in an education which can earn you much more money than you otherwise would have got would be a good debt especially if the terms of the loan requires repayment only if you earn enough. A personal loan taken out to improve your property and increasing it's value can be good but a personal loan taken out to go on holiday would be bad.

My thinking is you could always sell everything and repay your debt and be debt free. If you can't do that then you're really in debt and that needs to be sorted.

So I've got personal loans at 4%, credit cards (at either 0% or 4%) and a small mortgage at 4% ...but I can always sell the house move somewhere smaller, clear all my debt and have plenty of cash in the bank and then be debt free so I consider myself debt free. I posted on DFW with my circumstances as I have a serious negative cash flow problem (more goes out than comes in so am building up debt on a 0% on purchases credit card but paying down loans quicker) and I was advised to sell the house which I refuse to do as it earns much more than the interest charged. My net worth still increases each month by a small amount despite the negative cash flow.

kathrynha

If it net worth then I am debt free

Mortgage - £30000
Student loan - £10000

House value - £140000
Other assets - £30000ish

Net worth £130000
I like that

racing_blue

jaydeeuk1 wrote: »

Simple. Its where your assets, cash house and car, are worth less than what you owe.

If you have a £100k mortgage on a house worth £110k, you are not in debt.

I don't see it that way and neither would the mortgage lender. Your debt is £100k. Yes net assets are greater than zero, but this is not the same as debt-free.

To me all debt including mortgage, credit card, money owed to HMRC etc is debt. I carry some debt (in the form of a mortgage) because I want to live in a certain way, but would be even happier to live debt free & I hope one day will achieve that

Pidge_jen

To me its not having anymore loans or credit cards or car finance eating up a massive portion of my wages each month. Mortgage is ok. I can stop feeling like I'm paying for past mistakes when they are gone!

Deadbeat

A lot of people mention 'no credit card debt' as a requirement, which is understandable.

But what about someone who pays off their cards every month, so any debt is never more than ~6 weeks old, and who also has saved money which can pay off the cards at any time?

Would that person (assuming no other debts) be considered 'debt free'?

kathrynha

Deadbeat wrote: »

A lot of people mention 'no credit card debt' as a requirement, which is understandable.

But what about someone who pays off their cards every month, so any debt is never more than ~6 weeks old, and who also has saved money which can pay off the cards at any time?

Would that person (assuming no other debts) be considered 'debt free'?

We pay our credit card off in full each month and I don't consider it debt. We have the money to pay for stuff without it, we only use it because we get cash back on it.

Credit card debt was something I was wondering about recently. We are looking at moving our mortgage, and I was filling in an online mortgage affordability calculator, and credit card amount was one of the questions, along with shopping costs, and depending on how I filled it in gave two very different mortgage offers. As I had pretty much same amount down for both shopping costs and credit cards it basically had me down for spending the same money twice.

DD265

For me debt free is no debt other than a mortgage and student loan - both of which I view as fairly essential these days and I don't think they affect you in quite the same way that a credit card does for example.

When I have paid off my credit cards I will still have my car on lease so won't be debt free, but I won't have debt that I can increase if that makes sense so that will be a good feeling.

jaydeeuk1

racing_blue wrote: »

I don't see it that way and neither would the mortgage lender. Your debt is £100k. Yes net assets are greater than zero, but this is not the same as debt-free.

To me all debt including mortgage, credit card, money owed to HMRC etc is debt. I carry some debt (in the form of a mortgage) because I want to live in a certain way, but would be even happier to live debt free & I hope one day will achieve that

If I own 5 houses worth £1m with no mortgage, £100k in the bank but have a credit card bill of £10, I don't see that as being in debt but by your definition, I am.