Becoming debt free
Discussion
red_slr said:
DonkeyApple said:
red_slr said:
DonkeyApple said:
An important little snippet to also appreciate is that there is no such thing as 0% lending. No one has lent you money for no return. What they’ve done is got you to pay all the funding cost upfront in exchange for signing a deal with the devil that allows them to rape the crap out of you at X date in the future if you fail to honour the terms of that contract. And when the cost of something is hidden from the consumer we know for a fact that it will be higher than if the cost were explicit. There is not a lot anyone can do about 0% marketing but it is important to appreciate that it is the Katie Price of the consumer finance world, a total deception.
Not really. Some 0% deals ARE 0%. Perhaps the goods could be found slightly cheaper elsewhere, comparable, or what not but 0% does exist.Sofa company B sells similar leather sofa for £2500. They offer finance OTC at 6% or whatever or pay up front.
Comparable? I think so.
Secondary products are usually sold too, at massive margins. Damage insurance, stain guards etc.
There isn’t such a thing as zero funding in consumer credit. The consumer always pays a funding rate. When it is explicit then we can pay a funding rate as low as just a few percent but when a charge is implicit it is always higher for two factors, one it isn’t variable so has to be a rate that has the correct risk premium for the average consumer of that product or store and secondly when a charge is masked its always knocked upwards because its free money.
The key is that the consumer always pays. You have a product that you are walking out of the shop without fully funding. In place of that you have a credit agreement from a credit company, almost always a third party where you agree to terms and penalties etc for being lent the money. That money that you are borrowing has a charge. The credit companies are not borrowing at negative rates. They are borrowing at positive rates. They are adding their administration costs. They are adding their profit and they are adding the correct average consumer risk premium. And finally, the consumer is paying all of that. Not the credit firm, not the vendor but the consumer.
So, if the consumer is not paying this debt cost as an explicit number detailed on their monthly repayment schedule all you need to do is simply think about where it is sitting and then ask yourself if you’d be paying less interest if the credit firm had to explicitly tell you what the rate was that you were paying.
Just wanted to dredge this up and not start a new thread.
As of next week I will have enough money to become debt free minus the mortgage and my pre-tax student loan contribution (does anyone count this as debt or pay it off early?)
To close my current debt I would have to empty my savings and Stocks & shares account (earning at less than the interest on the loan). I would have zero savings.
I've got no big costs coming up for at least 3 months, a few vehicles to commute with if one should be out of action, and the OH has savings if the boiler broke or whatever.
What would you wise lot do?
As of next week I will have enough money to become debt free minus the mortgage and my pre-tax student loan contribution (does anyone count this as debt or pay it off early?)
To close my current debt I would have to empty my savings and Stocks & shares account (earning at less than the interest on the loan). I would have zero savings.
I've got no big costs coming up for at least 3 months, a few vehicles to commute with if one should be out of action, and the OH has savings if the boiler broke or whatever.
What would you wise lot do?
Lukas239 said:
Just wanted to dredge this up and not start a new thread.
As of next week I will have enough money to become debt free minus the mortgage and my pre-tax student loan contribution (does anyone count this as debt or pay it off early?)
To close my current debt I would have to empty my savings and Stocks & shares account (earning at less than the interest on the loan). I would have zero savings.
I've got no big costs coming up for at least 3 months, a few vehicles to commute with if one should be out of action, and the OH has savings if the boiler broke or whatever.
What would you wise lot do?
Consolidate, you're debt free nett, a great position. The main thing is you can pay the debt off if need be, and staying debt free as sensible.As of next week I will have enough money to become debt free minus the mortgage and my pre-tax student loan contribution (does anyone count this as debt or pay it off early?)
To close my current debt I would have to empty my savings and Stocks & shares account (earning at less than the interest on the loan). I would have zero savings.
I've got no big costs coming up for at least 3 months, a few vehicles to commute with if one should be out of action, and the OH has savings if the boiler broke or whatever.
What would you wise lot do?
Looking at the investment position is almost a separate exercise.
eldar said:
Consolidate, you're debt free nett, a great position. The main thing is you can pay the debt off if need be, and staying debt free as sensible.
Looking at the investment position is almost a separate exercise.
Forgive me, I didn't really get that. Are you saying just stay net positiveand pay it off whenever? Looking at the investment position is almost a separate exercise.
Lukas239 said:
Forgive me, I didn't really get that. Are you saying just stay net positiveand pay it off whenever?
He means don’t be in a situation where you pay it all off (yippee) then made redundant and no reserves. That aside how many months will it take to pay it down without touching your war chest?
Welshbeef said:
He means don’t be in a situation where you pay it all off (yippee) then made redundant and no reserves.
That aside how many months will it take to pay it down without touching your war chest?
It's a 60 month term and I'm 18 months in. I can wait until I've got a reasonable buffer it's just that it's been my focus for some time now that I'm growing impatient. Redundancy is a strong motivator to wait though. That aside how many months will it take to pay it down without touching your war chest?
Lukas239 said:
Forgive me, I didn't really get that. Are you saying just stay net positiveand pay it off whenever?
Basically, your assets are greater than your debts. Converting assets to cash to pay off the debts depends on how comfortable you are with the levels of cash you need/want.So, really yes..
Welshbeef said:
smifffymoto said:
I am debt free and it isn’t all it is cracked up to be.I can’t finance anything,nothing at all.
There is more to the story clearly but your in a good position owe no one nothing, want something save up for it Are you a ‘ghost’ (as they call it), Smiffy? If you’re on the electoral register and maintaining the usual tick-over stuff that running a household requires, you shouldn’t have much issue with finance.
Welshbeef said:
There is a balance - you only have 1 life and who knows when it is or isn’t your time.
Not individualised data but at the population level all the annual mortality data is publically available, its reported weekly and you can get GP level data, which if you really want you can even adjust for bias like smoking. So actually the data is there to give you a fair guess, certainly down to the 10-20k people whom your GP will serve level.I see people quote anecdotal experiences of early death and than translating it to broad expectations alot. But the problem with making your life decisions based on anecdotal experience is you miss the bigger fact based picture.
Google ONS mortality data, there is literally a whole industry studying mortality rate/risk, the summary your annual % mortality rate in the UK for all age groups is tiny for 'middle aged' group its 0.5% per year, even people at 90 years+ only have a 25% of dying each year.
This is the link to GP CQUIN data on mortality, 6 months out of date but mortality rates take alot longer to change, you can look at your local GP reported rates.
https://fingertips.phe.org.uk/profile/mortality-pr...
I agree though on not worrying about death, focus on living is a better option.
Edited by gangzoom on Monday 22 July 07:05
Lukas239 said:
It's a 60 month term and I'm 18 months in. I can wait until I've got a reasonable buffer it's just that it's been my focus for some time now that I'm growing impatient. Redundancy is a strong motivator to wait though.
What is the debt APR?Are there any early termination costs?
Will you need to borrow anything again in the next 42 months?
How much PCM will you save ?
Lukas239 said:
- 9.9%
- No
- £200
Why not consider clearing it down but leaving you a few months savings and once they are topped up do it again. - No
- £200
That rate is poor if it is affordable I’d personally be wanting to wipe it away ASAP and then start rebuilding my savings pot with £200pcm + anything else / the funds you used to generate your offset savings.
Can you not get a bank loan at a substantially cheaper APR and use that to pay off the high interest debt? Sainsbury's loans start at 2.?% APR, and that 6 or 7% saving will massively reduce the overall payable.
Your ISA should be making more than 3%, so leave that cash there and then simply pay back the cheaper loan. Or take some money out the S+S, pay back some of the high interest loan now, leaving enough savings for you to feel comfortable, and then borrow cheaply to cover the rest.
Your ISA should be making more than 3%, so leave that cash there and then simply pay back the cheaper loan. Or take some money out the S+S, pay back some of the high interest loan now, leaving enough savings for you to feel comfortable, and then borrow cheaply to cover the rest.
Condi said:
Can you not get a bank loan at a substantially cheaper APR and use that to pay off the high interest debt? Sainsbury's loans start at 2.?% APR, and that 6 or 7% saving will massively reduce the overall payable.
Your ISA should be making more than 3%, so leave that cash there and then simply pay back the cheaper loan. Or take some money out the S+S, pay back some of the high interest loan now, leaving enough savings for you to feel comfortable, and then borrow cheaply to cover the rest.
Where are you seeing more than 3% Cash ISAs?Your ISA should be making more than 3%, so leave that cash there and then simply pay back the cheaper loan. Or take some money out the S+S, pay back some of the high interest loan now, leaving enough savings for you to feel comfortable, and then borrow cheaply to cover the rest.
Condi said:
OP says he has S+S ISA? Which should return more than 3% you would expect.
Yeah currently at 7.9% amazingly. Reluctant to touch it but it is less than 9.9%. The idea of refinancing seems silly to me despite the logic. It's a band-aid for a bullet wound and I'd rather clear it than halve it. I think I'll wait until I'm a few months clear.
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