When people think that debt isn't debt.

chester81

I have started a little debt conversation group at work since being more open about my debt. There are about 3 of us who are in similar predicaments ( I owe the most ). One of our colleagues is quite disparaging about us being in debt and likes to tell us that we should only have what we can afford..... bit late for that although I do agree that this is the way to go when I am eventually debt free.

Interestingly she arrived at work today in a brand new Renault Scenic Grand which cost about 25K ( I googled it). Apparently she is renting it on a least deal so "it isn't debt". We also know that she and her husband have 30K in unsecured loans that they took out to pay for an extension but "it's not debt as it's improved the value of the house".

Now, I am in no position to criticize anyone's finances and her money is her business but It's interesting how people view their own situations. She is SO judgmental of our debts and yet she is in debt to the tune of 55K!!!

January2015

Some of our debt was unsecured loans to extend our house. It was fine whilst we could pay it - life interrupted and now we can't meet the full repayments and are on a DMP. Yes, my house value has increased, but unless I want to consoldiate or sell and move to something less costly to clear the unsecured loands (no way to either option) I can't access that increased value - so the unsecured loans are debt.

It was always debt in my opinion though.

chester81

January2015 wrote: »

Some of our debt was unsecured loans to extend our house. It was fine whilst we could pay it - life interrupted and now we can't meet the full repayments and are on a DMP. Yes, my house value has increased, but unless I want to consoldiate or sell and move to something less costly to clear the unsecured loands (no way to either option) I can't access that increased value - so the unsecured loans are debt.

It was always debt in my opinion though.

I agree! I have no opinion on people borrowing money for any purpose. My borrowing was due to disorganization and an inability to wait/save for anything, so I can't be critical. My only issue is when people take the moral high ground when they are actually in a similar or worse situation!! Most of my 40K debt is 0% or low interest but I still see it as being HUGE problem and something that I need to continue to sort out ASAP!!!

getmore4less

You could say any committed payment is a debt if you don't have the cash to meet the all the payments now, that would include all contracts phone,tv etc where not on a rolling contract, could include things like council tax if you went extreme.
A car lease would fall into contractual debt pool

Asset backed debts are usually considered separately unless the asset depreciates faster than the debt gets paid off.

bearcat16

Imo a car lease (actually "contract hire") isn't debt, it's more like a rental. You hire the car for 2 or 3 years and pay a rental fee every month. Then you hand it back. There's no interest, as long as you keep to the terms and conditions, and you never own the car.

If she actually means a PCP (personal contract purchase) then that IS debt, as you are charged interest and have the option to buy with the balloon payment at the end.

Sanctioned_Parts_List

I always think there's a mistake in believing that your own home or your own car is an asset, or that it even has a value. While I'm living in it, it's of no value to anyone else, so has an asset value of £0; meanwhile it's costing me mortgage repayments, council tax, utility bills etc..

So my own home is a liability. Situation is worse with cars, which with very few exceptions, only ever go down in value.

Possibly a rather grim view of things, but works for me

Dobbibill

I would consider the loans as debt otherwise surely she would have used her 'savings' to do the home improvements, rather than pay X amount of interest on an unsecured loan.

Would be interesting to see what her lease shows as on CR, if it is indeed PCP it shows as the full amount of the vehicle purchase price as a loan.

CalumHeath

I've seen this topic be brought up a few times on these forums during the last two years. You will find that a lot of people like to define the word 'debt' to suit their own situation.

Here are some examples:
- Some people don't consider a mortgage a debt (it is).
- Some people don't consider a mortgage a debt if there's equity in the property (it is).
- Some people don't consider something a debt if you're making the minimum repayments (it is).
- Some people don't consider a debt a debt if they have the means to pay it off (it is).

The list goes. I've just accepted that people like to make themselves feel better by insisting that they in fact know the true meaning of the word and other people (including dictionary definitions) are wrong - it doesn't change the fact that a debt is a debt though. It's all just the psychology of how we in this country deal with money, credit and debt, I suppose.

The fact is a debt is any sum of money that is owed. I'm in debt to one credit card company. It doesn't matter that it's 0% or that I have the money to pay it off when the 0% ends - I am in debt and there's no other way of describing it, but I don't mind admitting it because if I tried to insist it wasn't a debt I'd just be a liar.

I lease my car and I consider it a 3-year debt. I don't just get to choose to stop paying it and it goes away. I have to pay it for 3 years through hell or high-water. I signed a contract for 3 years: the lease company won't be interested if I try to give it back after 18 months; they won't call it quits. And nor should they - I knowingly entered into a contract with them. It's a debt.

catwoman73

Of course it's debt. I am in a similar position to your colleague in that I have a car on PCP (much smaller value though), a personal loan for home improvements and a kitchen on 0% credit. I have to make payments on these every month and if I don't, the debt collectors will be in touch pretty sharpish!

Currently, the interest rate is very low and the payments are very affordable but it's still borrowed money that has to be repaid.

user1168934

IMO every single penny that you have committed to pay to anyone is a debt ...... including mortgage, car lease, outstanding amount on credit cards (even at 0%) .... the list goes on.

matchboxfull

I always think (I say 'always', it's more 'since I've pulled my head out of my bum about money') that it's amazing how times have changed so fast. Our current culture of car finance, credit cards, loans, home improvement didn't really exist four or five decades ago. It's almost ubiquitous now. Many of us have been born into a society where the idea of waiting until you can afford something is crazy-talk, including myself.

I think most of us on this part of the forum have been 'victim' to that cultural mentality. I'm not saying we're without personal blame, but it's sure hard to rise against that tide.