What is Debt free?

peteuk

Thanks everyone for taking time to answer what would appear to be a simple question, but as I say everyone has a different point of view.

We are at the point were we have started to build some savings and have a plan to build this. In the next few years I will be looking at retiring from my current job (with a tax free lump sum and a monthly pension) so anything that does linger at that point can be wiped. But I am hoping to have the credit cards down to a minimum by then.

enjoyyourshoes

I would ask:-

why are you £5K in debt?

Solve that problem and then look forward to:-

how can you pay off this debt as quickly as possible, what are you plans?

Do that and then look forward to retirement and use the tax free lump sum to benefit yourself not the CC company or the loan company.

redpete

peteuk wrote: »

Thanks everyone for taking time to answer what would appear to be a simple question, but as I say everyone has a different point of view.

Full agreement from all posting here that credit card debt is debt.

binaryuniverse

I'm stoozing at the moment. All my debt is at 0%.

But it is most definitely debt.

Novice_investor101

The only debts I have are my mortgage & student loan (plan 1). I don't particularly worry about either of them. The student loan gets deducted from salary & realistically I'll probably never fully pay it off but it'll get wiped eventually...
The mortgage I class a "good" debt as it's better to be paying back a loan that means I'm working towards owning a valuable asset (ie I'll have something to show for it at the end) rather than not having the debt at all but having to pay ever escalating rent payments for the rest of my life, which is not what I want to be doing with my retirement income in 25 or 30 years time.
I use credit cards, but they are paid off in full every month.

peteuk

enjoyyourshoes wrote: »

I would ask:-

why are you £5K in debt?

Solve that problem and then look forward to:-

how can you pay off this debt as quickly as possible, what are you plans?

Do that and then look forward to retirement and use the tax free lump sum to benefit yourself not the CC company or the loan company.

We got into financial difficulties when we had our second child. With the wife on Mat leave, we realised we were in trouble...

That was 2005 and we were 60K in unsecured debt. We spoke to CCCS (now Step change) and started a DMP. This over the years has significantly reduced our debt. We stopped the DMP with Step Change (when they changed to Step Change) and did a private DMP. Settled everything but the Lloyd's loan, which we are doing... Down to what we are left with.

We've resolved the issues and reduced our reliant on loans but have recently taken credit cards. Everything now is manageable.

The question was to work out when I will be "debt free", I see it as when the loan is paid, just leaving the manageable credit cards.

debtfreeforlife

Bit confused as to why you don't consider credit cards that have an outstanding balance and aren't paid off in full each month, debt? Your credit card company will certainly view it as debt owed to them, even if you are paying it back.

Fireflyaway

To me debt free means you don't owe anyone anything. Having an overdraft or credit card or car finance is still debt even if its a small amount and up to date.
I suppose a mortgage might be viewed slightly differently because not very many of us could purchase a home without one. Its still debt though.

Jon_B_2

At the end of the day, it’s down to semantics.

In my view a debt which is due to an asset near or exceeding the value of the debt is largely neutral (mortgage/car loan).

Otherwise, If your cash in hand (savings) exceeds your credit balances, then in my view you are debt free.

E.g.

My mortgage is £194k outstanding. House is worth £325k.

My car loan (HP) is £11k outstanding and the car according to autotrader is worth near £11k.

My credit card balance is circa £300. But my instantly accessible funds total around £13k. I view myself for the sake of this argument as “debt free”.

Mnd

We have no debt
No mortgage, loans, overdraft charging us interest

We do have day to day credit cards, all paid off in full monthly
Also balance transfer and purchase credit cards on 0%

We could pay them this second if we wanted to, but that money is earning us interest, so I consider that we are debt free