What is Debt free?

peteuk

I know its a strange question but so many people have different opinions on what they consider being "debt free"

I currently have three Credit Cards, total balance £1.8K
Wife has an old loan (currently with Cabot) balance £3K
Wife has Credit card and store card balance £1K

Once the old loan is paid off I would count this as being debt free, that is until we get a mortgage and a house. But a mortgage would seemingly be classed as "acceptable debt"

The Credit cards and store card are under control, under there limits and being paid off....

Your thoughts on what is "Debt free" is appreciated.

theoretica

For me, debt free is no debt at all. If credit cards are paid off in full every month I count that as debt free.

Debt neutral is having debt but also having more than that sum in savings, for whatever reason.

Controlled debt is what I would call your situation with the credit cards. You owe money, but it is not a problem for you.

Unicorn_cottage

For us being debt free is having paid off all our "consumer" debt which by our definition excludes our mortgage. Once we have paid off our debts (bank of mum & dad, credit card, overdraft and a loan), then we will be debt free. I will celebrate once we have paid off the first 3 debts as the loan will just have to run its course as we want to concentrate on other things like mortgage overpayments - well we can dream!

binaryuniverse

There's a sliding scale of debt, which probably goes a little something like this.

No debt:
Debt free. You owe nobody a thing. Hooray! Hopefully you are saving too. Otherwise stoozing (Good debt) may be a good way to go to build up a pot.

Good debt:
Debt is at 0%. If you need to pay it off tomorrow, with savings, you could and it won't be an issue. This debt is possibly even making you money, rather than the other way about.

Bad debt:
You have debt. If the proverbials hit the fan, and you need to pay it off tomorrow, you couldn't. Also includes debt that you are paying interesting on, or costs money in other ways. You're one step away from IVA/Defaults.

Overwhelming debt:
Huge problem. You have so much debt you can't afford the repayments. The interest is more than the debt you can pay off. IVA/Bankruptcy quite likely. Possible repossession of home.

Plumjam

Debt free means that you are not paying ANY interest. Many people who are buying their own homes will need to pay interest on their mortgages but apart from home / car loans, if you’re paying interest, then you are not debt free. The exceptions are those who are VERY good at stoozing and earn more by moving their money around than they pay in interest, but seriously, they are few and far between.

worried_jim

I would exclude mortgage, but with less than ten years to go I can finally see a time when I am absolutely with no further caveats or kidding myself debt free. Until then, clear the credit card every month.

sourcrates

Completely Debt free, no debt now whatsoever, no loans, no cards, no mortgage no nothing.

I Live within my means, if I want something, I save up, after two insolvencies, and over 30 years been in debt of some sort, me and credit are done, forever.

Never playing that game again.

datlex

peteuk wrote: »

I know its a strange question but so many people have different opinions on what they consider being "debt free"

I currently have three Credit Cards, total balance £1.8K
Wife has an old loan (currently with Cabot) balance £3K
Wife has Credit card and store card balance £1K

Once the old loan is paid off I would count this as being debt free, that is until we get a mortgage and a house. But a mortgage would seemingly be classed as "acceptable debt"

The Credit cards and store card are under control, under there limits and being paid off....

Your thoughts on what is "Debt free" is appreciated.

I wouldn't regard just the loan being paid off a being debt free. In my opinion, to be debt free you need to have paid off the credit cards too.

Credit cards can be a means of payment. You seem to have used them as a source of funds. If they are a source of funds then you still have debt, even if you don't have a balance currently. (e.g. You aren't saving for emergencies or you are planning on putting next years holiday on a credit card).

Quite simply for me, debt is spending more than you earn.

tori.k

We currently have no consumer debt, credit card is paid off in full each month but I class myself as a debt free wannabe until the mortgage we are planning is gone, after all it's just another loan gathering interest.Its no different to me than anything you don't own until the last payment has been made.
Debt free to me is having that freedom of choice, do I want to work full time, part time or at all, while there is debt in play that's someone else's choice.

redpete

If you are not paying the credit cards off in full each and every month why would you consider them any different to any other loan?

enjoyyourshoes

Debt is money you owe to another party.

this includes credit on credit card (you owe them money),

mortgage (you owe them money),

0% cards (you owe them money)

etc

It really is that simple.