£2m in Interest through Persistent Debt

ToxicWomble

Whether the figure is theoretically correct or not, I would love to know why and how £300k was spent on cancer treatment 20 years ago.
Thats almost enough to buy your own treatment machine !!

John_

ObsidianRougue said:

For everyone's benefit, these are the figures. Maybe you can check my maths?
Initial principle: £310,000
Principle remaining: £190,000
Average APR (not weighted, just simple average): 31.4%
Length of term: 24 years.
I calculate it to be about £1.875m (I rounded up to £2m, Sorry. I didn't mean to mislead)

If she’s been making the minimum payments and not spending any more then the balance would have been paid down long ago. If it hasn’t then she’s been spending a lot more.

callum9999

John_ said:

ObsidianRougue said:

For everyone's benefit, these are the figures. Maybe you can check my maths?
Initial principle: £310,000
Principle remaining: £190,000
Average APR (not weighted, just simple average): 31.4%
Length of term: 24 years.
I calculate it to be about £1.875m (I rounded up to £2m, Sorry. I didn't mean to mislead)

If she’s been making the minimum payments and not spending any more then the balance would have been paid down long ago. If it hasn’t then she’s been spending a lot more.

For the majority of the time she held that debt, it wasn't unusual for minimum payments to be less than the amount of interest you're charged.

I can't be bothered to do the maths, but it may be possible for her not to be adding to it and still have that much left. Not to mention, if you're that utterly irresponsible with debt in the first place, I wouldn't necessarily assume they aren't adding to it!

nick74

Nothing in this scenario adds up.

For example most final salary pensions are index linked, so to have a pension of £115k now she would have started off with a pension of about £70k per annum in 2000, adjusted for inflation. A £70k pension in 2000-2001 would have given her about £4100 net per month.

Also, even considering the insane lending practices of the late 90s/early 00s, who would have given someone on a £70k pension combined credit limits of over £300K? Even if she had a pre-retirement income of say £150k, and the cards were split over a dozen different lenders it doesn't ring true.

Then there are the monthly repayments. If memory serves, the majority of cards back then used to calculate the minimum monthly repayment by adding the interest to the balance then taking the minimum as around 3-5% of the total. So on £310k of debt the minimum payment would have been over £12k per month.

So, in summary we have someone on £70k managing to borrow £310k on cards, then making a £12k minimum payment every month with a net monthly income of £4k......and the OP wonders why no one believes them?

NoodleDoodleMan

Would love to know what she did for a living that gives a final pension of £115k  a year in her 50s yet she has zero grasp of finances.

Ditto

jimbo26

ObsidianRougue said:

 it was more a cautionary tale that I thought would be good to share.

Not really because I doubt many people have a 310K credit card debt.

eskbanker

ObsidianRougue said:

For everyone's benefit, these are the figures. Maybe you can check my maths?
Initial principle: £310,000
Principle remaining: £190,000
Average APR (not weighted, just simple average): 31.4%
Length of term: 24 years.
I calculate it to be about £1.875m (I rounded up to £2m, Sorry. I didn't mean to mislead)

It's hardly surprising that most people are focusing on the scale of the numbers posted, but, regardless of their credibility, if a zero or two was knocked off the balances, the fundamental point remains that making minimum repayments for a very long time inevitably means a substantial amount of interest will be paid if the average APR is in the thirties.  Effectively it means that an amount equivalent to the balance will be paid every three years, only a small proportion of which will go to balance reduction, so it's not a surprise that over 20+ years the repayments will be a substantial multiple of the balance, i.e. between 6x and 8x isn't a huge shock mathematically.  This is of course exactly why the FCA introduced the persistent debt rules.... 

Malkytheheed

3 pages now devoted to what is clearly a troll thread. Come on guys... Let's not do this to the forums. 

On_my_way

Sorry but I don't really get this - she had quite a bit of income there but only ever paid the minimum?

Please don't release equity on your home to pay her debts- she is able to pay them 

Sharon87

If it's real, than file for bankruptcy with that amount of debt... if it's not real, then stop wasting people's time!