What you say - and what Anna says about the merit of it all I broadly agree with - but you need to understand that most of the money that is sloshing around, 80%, is not fiat money.
I don’t think it is a good idea, I’ll be clear about that
But you can’t put that genie back in the bottle, so you have to live with it and understand how the system works.
Personally I have no non-mortgage debt (well, apart from the CC which I pay off fully at the end of each month - so no interest charges) and I’d like it to stay that way.
It is, however, much harder for people just out of uni without secure jobs & good incomes.
How the banks account for the loans is not the topic here Paul. Buying on a credit card or a Loan Agreement is the same as walking into Argos and buying a TV. Instead, you get the TV from Argos that day but you actually buy a loan for the TV from Barclaycard (say) and promise to pay them within 30 days.
Barclaycard employing a team of experts know that you are only human and hope that (come 30 days) you will either forget, not have the dosh, pay minimum amount.
You know this. We all do. Its predatory. That’s why there are laws to stop the weak willed in society coming a cropper.
There’s always a good reason (???) - if one absolutely must find one - for doing more or less anything.
Someone trying to pay the rent and feed the family - will have challenges too.
Such is the culture in UK, that even those in full-employment, with secure jobs & good incomes - many, many of those will spend way over and above their income.
I have no idea how it will all end up in UK and I am glad to be now living a very different life here in France.
Who knows what what will happen after Brexit. We can only guess at this time and no-one really knows (not even you John) …but that’s another post me thinks.
Yeah, that sucks. It also sucks that the young woman was upsold on her car. Both of these do, I agree, fall into the sphere of caveat emptor (or should that be qui mutuum accipit cave)
Oh dear, I do seem to be coming in for some stick because I’m daring to say that I understand why some people use credit, and why it is more available (and acceptable) today than it was when I was in my 20’s and that the financial landscape has also changed since then.
Credit, ultimately is a tool - one with costs (to agree with Darren) and one which has a sharp edge if not used carefully.
But (unlike a large popular religion) I do not think that offering it, or using it is inherently immoral or unwise.
Although in the UK it is also part of the brave new world to rack up the debt doing a “university” degree of questionable worth at an academic institution of questionable quality and proceed from there.
Yep, it is sad that so many youngsters are heading that way.
Thankfully, there are ex-uni folk with their heads screwed on, so all is not lost - yet.
My siblings all went to Uni and I went out to work. Their lives were very different to mine, for a while - but we all found common ground over the years. Can’t say that one way is better than another, it’s horses for courses.
(They did not run up Uni Debts as they worked throughout every holiday to ensure the money was in place - but those were different times.)
The trouble with theories is that they can ignore the parts of the jigsaw that don’t fit.
Your theory is looking at the cardholder and the credit card company. But at the point where the transaction takes place and the payment becomes part of the supplier’s turnover, the money has to be available. You buy a car on credit from a small trader, he might immediately withdraw that money from his bank and use it to replenish his stock.
Equally, you can withdraw notes from a cash dispenser on your credit card, if you’re prepared to pay through the nose for it, in which case the figure on your account will be matched by the money in your own hot little fist.
I’m not saying offering or using credit is immoral per se, but it’s often offered in a misleading way that doesn’t make the true cost clear, and I think intentionally misleading people in order to take advantage of them is immoral. Obviously, whether using credit is wise or unwise, depends entirely on circumstance, but unfortunately it’s the people without a secure income who are most likely to use it and they’re precisely the ones who shouldn’t, and they’re also very often the most vulnerable to aggressive marketing because low income tends to go hand in hand with poor education and a lack of life skills.
I do actually think France is streets ahead of the UK in protecting people from slipping into surendettement, and there are fewer pressures to live beyond your means. As I recall France tightened its rules on surendettement around 8 years ago. Whereas the UK economy relies too much on consumer spending to want to change the pattern.
Yes - ways around things, if you are a Muslim you aren’t allowed to charge interest on loans to other Muslims, so you don’t call it interest. You are also supposed to pay zakat which is then redistributed etc etc. Many years ago I wrote a very tedious dissertation about Islamic tax structures with specific reference to the Ottoman Empire, if you’re having trouble sleeping I can probably dig it out…
Nothing of the sort. Subprime was a mortgage property related issue caused by the value drop of the houses and lead to foreclosures.
This is someone who wanted more than they should have sensibly borrowed. People need to cut their cloth etc etc
Interesting that the German word for ‘debt’ and ‘guilt’ is apparently exactly the same - ‘schuldt’?
I only got into deep debt once in my life when I got a massive salary in my first ad. agency there. Went mad on buying everything including a house, car and even dafter things like a complete set of the Encyclopedia Britannica! My salary comfortably paid for all these things on term payment, but when that job went out of the window it got really hard. Apart from being in my late 20’s the whole social ethos in my group was based on high salaries, so I just couldn’t keep up. So not only the young get into strife but older people too.
However, it was a turning point in my life as I couldn’t find a similarly paid replacement job, so started my own small design studio - I also did Copywriting, and for a short period even produced for another Company a Prostitutes Listing (with photos and I kid you not!). I latched on my services to two printers which extended both their and my offerings at competitive rates, and print commissions when passed over.
It took just on three years and the start of grey hairs, and many sleepless nights, but I never went back to being a wage slave - figuring that if I got into financial strife, it would only my own fault and not an anonymous ‘corporate decision’.
Finances ebbed and flowed and certainly massively helped by my wife of the time holding down a very good job.
I was 32 when I started, and had my final international contract at 65 which was a long time in the ad industry. The debt situation a) woke me up to how bad debt is and b) never to trust an employed situation or employer. I worked on fees or contracts, both of which were recuperable by law (usually!)
Never had another debt and only bought what I could pay cash for. At that time I recall interest rates could be a usurous 27%, and that was enough of a deterrent in itself.
So it is possible to learn from mistakes, once one is honest enough to stop blaming others.
I was about to say the same thing John. There was plenty of loan money sloshing around the Gulf States even in the 80’s when I was there. Not only from banks but wealthy individuals.
I also had a Mortgage client in Jordan! Only Ten year ones available, and even then he regarded them as high-risk = high interest.
When I bought my first house aged 22 the LTV was 3 x your salary, a sensible level IMO, spin on to the 90’s/00’s and this went out the window with ridiculous multiples as house prices rocketed, the crash in 2008 brought back some sense but now LTV’s have gone back up again as lenders scramble around for mortgage business.
Norman’s being a bit unfair in that if young people don’t take a risk then they will never get on the housing ladder, it’s neither their fault nor the lenders if it all goes pear shaped, house prices are simply too high.
And part of the problem is that the great British public has been brainwashed into thinking that if you don’t own a jerry-built shoebox by the time you’re 28 you are a failure.
Other countries don’t have the same obsession with property ownership and they don’t attach any social stigma to renting.
I find it sad that saving up for a house when you should be young and having fun, buying a starter home and then moving “up the ladder” and paying a huge chunk of your salary every month of your working life to keep up the mortgage payments, looms so large in so many ordinary people’s lives. Renting is less risky and less stressful and rental properties are not built any differently to houses you buy. But the British economy would probably collapse if ordinary people stopped signing away their lives to pay overinflated house prices.
While I agree with your observation about the British psyche where ownership vs renting is concerned, lifelong renting only makes sense if your total outlay would not buy the property that you live in.
However rents are usually not much different to mortgage repayments in amount - why spend 30 years effectively buying the property, but not wind up owning it?
Buying also fits in with the way we work and retire in the modern world - remember that in the early part of the 20th century the expectation was that you would work, have a short illness and die - I know it sounds crude when put that that way but for many working class people this is exactly what happened.
We now expect to live well into our 70’s and 80’s and have a period where we are either unable to or would prefer not to work - buying a house outright so no ongoing rent or mortgage needs to be paid allows one to scale back finances in retirement without losing standard of living.
- it was the fact that you reckoned it was so much harder for people just out of uni without secure jobs and good incomes…
