So how much debt is "acceptable"?

dannyjo22 said:
For me it should be 2x wages for a mortgage and 3x joint wage. 10 years ago I'd say you should easily go higher than that but in those days my gas and electric for a quarter came to £90 instead of £90 a month.

There are also all the add ons people have that few did 10 years ago. Multiple Mobile phones, broadband, tv packages etc.

For me there needs to be a change in thinking that if you have to plow more than 3x your wages into a house you should be looking at other options, but that of course needs a change in the way the government flogged off all the council houses.

For other loans I'd borrow perhaps 15% of my wages over 3 years and no more.
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By your reckoning, Mr and Mrs Average will NEVER own their own home.

In fact, to buy a reasonable 3-bed semi, by your rules, you would need to be earning nearly £100k!
 
Just to clarify, if someone could confirm please?

If you default on payment:
Unsecured (which should be "Insecure" dammit!) loan = CCJs etc. etc.?
Secured loan = repossession of whatever the loan is secured on?
 
DRZ said:
By your reckoning, Mr and Mrs Average will NEVER own their own home.

In fact, to buy a reasonable 3-bed semi, by your rules, you would need to be earning nearly £100k!
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Yes I am. People spend too much of a percentage of their wages these days pouring into mortgages and over stretching themselves instead of enjoying themselves.

There should either be more decent council housing or house prices are too high if you need to borrow in excess of 3 times a joint wage. If there were better controls on what people could borrow for a mortgage there would be no choice but for prices to fall.
 
debt is not a bad thing - it's when it becomes unmanageable debt that it becomes an issue.

me and the missus have nothing on credit cards/ 15k outstanding on Personal Loan for my car which is paid monthly for another 3 years and £160k mortgage on 230k property.

Against that we have 25k or so in savings and investments/shares etc

It's very manageable against our income. Some might say that 160k ZOMG etc - but it's all relative to your income v expenditure.
 
I have a big old mortgage, but that's it.

Debt secured against a property that doesn't cost more than 50% of take home salary is very manageable. There is a reason banks hand out mortgages... they're fairly risk free for them.

If I get a registrar job I am definitely going to buy a flash car, which may require a bank loan (or robbery).
 
Everyone has been there, in 2007 i was in about 8-9k worth of debt, now i owe about 3k. i think the hardest thing now days is trying to buy a property specially for new buyers, you need at least 10 - 20 % deposit so for example you want to buy a £130 k house you would need at least 20 - 30 k to be accepted, this is partly due to banks lending 100% mortgages to any joe blogs and not being able to afford the repayments, me and my partner is currently trying to get a mortgage but i wouldn't be surprised if we got rejected. The worst part about it 95% of people don't have that sort of money saved and have to resort to friends and family to help out.

but house prices are rediculously high and expect people to pay 130k for a 1 bedroom appartment.
 
I spent ages wondering how so many of my friends managed to get a new Lexus or other shiny toys when I was earning much more than them with no commitments. :eek:

A few years passed and then I ended up finding that many of them had got everything on credit and were then miserable with the huge cloud of debt hanging over them...

The only debt I have is my mortgage, and that's the way I like it. I could probably get a ridiculous car if I wanted to but tbh I've gone through the phase where I really care about having something flash - I just want to be comfortable, able to sleep at night, and be able to have the holidays and all the beer and food I want. :D I want a £21K grand piano but I'm saving for it (I ideally need to move to make room for it anyway).
 
once you spiral into debt it's hard to get out.

my parent's had to help me out at some point as it was un-manageable. you live and learn, i was paying about 4k Interest on a 3K loan. that was bad times and not going to repeat it.
 
dannyjo22 said:
Yes I am. People spend too much of a percentage of their wages these days pouring into mortgages and over stretching themselves instead of enjoying themselves.

There should either be more decent council housing or house prices are too high if you need to borrow in excess of 3 times a joint wage. If there were better controls on what people could borrow for a mortgage there would be no choice but for prices to fall.
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And rent prices would go up which would keep house prices high becuase people would rather save up for a deposit and buy than pay someone elses mortgage or for their retirement.

In addition, people HATE selling a house for less than they think it is worth, regardless of the price anyone is willing to pay. If Cynthia over the road got 250k then barbera is also gonig to want 250k and they just wont sell. Which will also keep price high since demand will outstrip supply.

Unless the govt actually step up and build 500,000 houses a year for the next decade we have no choice.

4x salary is more than affordable anyway, its just that people are generally dumb.

The key for me isnt the amount they can borrow, it's the amount they can save in the first place to show some commitment. A 15% deposit should be mandatory in my eyes. That would mean people have to a) borrow less, b) giving them some leeway should price drop, c) showing the bank that they have the ability to actually be sensible with money.

Also the banks should be more responsible. We went to the bank earning 25k and 30k, they said we chould have up £280,000. That sum is utterly ridiculous. Fortunately they don't seem to be offering 100% or even close mortgages any more. I only hope that they never return.
 
Acceptable to me is being able to pay double what you're actually paying. I have a mortgage for the house, 1.2k on cc (at 0% for another 10 months) and i would guess around 5-6k remaining on a loan for the car that i wanted but i havent checked the balance on that for a while.

Living comfortably enough to buy a couple of shiney things each month if i wanted to without having to look at my bank balance or i can not buy shiney things and put more in to paying off the cc before the 0% interest runs out (i usually do the latter).

I reckon if you have to carefully manage your finances to avoid going in to negatives or anything like that then you've probably borrowed too much and need to concentrate on clearing the debt.
 
Financial management! You can make money for free using the right credit cards, i have 3 credit cards i use all the time, but no debt that i pay any interest on any of them, they either save me money or make me money for things i would have done anyway.

I don't have any loans apart from my student loan, but still have some student accounts with the overdraft balance in savings accounts as the overdraft is free and gets reduced every year by £500 which i pay out of the savings accounts.

Paid for my Clio with Cash
 
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Debt is not necessarily a bad thing, interest on debt is the biggest problem. If you can get interest free loans from work or you can get a credit card with 0% and you already have a cc full and you move the debt around like that. It can be all right. If you can avoid debt then you should, but these days with living expenses so high and you are lucky to earn enough to save money every month. which means the only way you can buy nice things is through debt agreements. If you can afford to pay off a cc at an amount way above the minimum price then debt is actually very useful.

But it is very easy to get caught in a debt trap and it can build up without you knowing.
 
Depends on how you manage it, my debt is pretty massive, but i am able to shift it around and figure out solutions, so i can pay for my semi-luxury lifestyle.

I'm at the point now where i need to live like a pleb, or rob someone who is very rich.
 
I could realy do with a bonus that i would just throw at my loan which is at £23 a month interest with a minimum payment of £80 that is on direct debit. I would like to be able to pay like £800 off on it on one go. I moved my cc debt to a 0% card. But then that freed up my other card and now that is on £13 ******* interest :/

But i don't let debt stress me out, the banks have enough money they can wait and if i lose my job they can just wait. I can't get any more credit anyway so, i just make the payments and get by. I would like a lump sum though to just get rid of it all at once.
 
The question of loans / finance vs saving comes down to the value of "having it now" vs the extra you pay in total for using finance.To decide whether this difference is worthwhile, you need to think about the time you would otherwise need to wait in order to save up to buy the item outright.

In the case of a house, where it might take you 20 years to save up for in order to buy outright, the difference is almost always going to be worthwhile - having a home 20 years earlier is obviously very valuable...

A car is another case where finance can be attractive. There are often good finance deals to be had in order to entice sales, so the extra months you get with the car can often come quite cheaply.

Obviously loans for value-adding purposes (home improvement, business purposes etc) have to be classed in an entirely different light. If the investment brings you a bigger increase in value than the total repayment cost of the loan, then it's been a net benefit (assuming you didn't actually go broke making the repayments!)

For smaller items that are put on credit cards, finance is a lot less attractive. The high APR means that the difference between total cost original purchase cost will often be high. Short of emergencies, or short-notice essential purchases, I don't see the logic in keeping credit card debt around. Small purchases are best saved up for, and if you have difficulty saving up then it should be a good indicator that you can't afford what you're after anyway.
 
Generally I don't like to take loans bar from my mortgage but I have no issues with people that want things quicker and get finance as long as they can afford to pay the loan back
 
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