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The Normality of Debt

Debt is a normal part of life, but do you owe what many consider to be "normal"? Take a look, find out, and - if you want - do something about it.

These days, it’s almost impossible not to accumulate debt. With the cost of living, transport, and bills seemingly increasing while wages fail to keep pace, getting into arrears is often something which cannot be avoided.

Demonstrating this, a recent survey revealed that more than 60% of Britons started 2020 in some form of debt. Potentially, this could include credit cards, personal loans, or a range of other costs.

At this point, some people may jump to conclusions about the purpose of these expenses. However, as evidenced by the research above, this is a normal part of society. This is not a group solely obsessed with material gain and unwise spending. Instead, it’s important to clarify the difference between good and bad debt.

The difference between good and bad debt

An image of a coins on a balance scale with one side labelled good and one side labelled bad.

Ask someone about good and bad debt and, chances are, they won’t see a distinction. However, the reason why so many of us are in arrears is probably due to ‘good debt’. These costs help us move on with our lives and make things better. For example, to secure better prospects, many people choose to go to university. To afford the fees though, it’s often vital to take out a loan.

Otherwise, it’s usually impossible to get on the property ladder without taking out a mortgage. Another example is weddings. As these are generally expensive occasions, you may need to take out a loan first before being able to marry your partner.

Bad debts, on the other hand, only occur when expenses become unmanageable. There are several ways to identify if you have a bad debt:

  • You don’t see a way to pay off the money in a reasonable amount of time.
  • The combined Interest rates and charges put you into persistent debt.
  • You cannot comfortably afford the monthly repayments.

If this sounds familiar, you may wish to get in touch today. We’ll discuss your options and help identify whether debt consolidation is the best option for you.

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What is ‘normal’ debt?

In a separate study, published last year, it was revealed the average person held debts just short of £7,000. However, around 16% of respondents wouldn’t start worrying about their financial situation until they owed more than £10,000.

Indeed, a common sentiment of the research was how normal debt is – with aspects such as ‘using an overdraft’ regarded as a necessary part of life. Furthermore, the average person only considered themselves to be ‘in debt’ once they owed almost £3,900.

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Debt is normal – but you can still do something about it

Although it’s nice to know that debt is something which isn’t only affecting you – far from it as it turns out – you don’t have to just accept it. If you’re uncomfortable with the amount you owe, and want to do something about it, contact us and we’ll talk to you about debt consolidation.

Potentially, you could repay your lenders within 24 hours and be well on the way to a more manageable financial future.

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Unsecured Loan Representative 69.9% APR

Borrowing £7,500 over 36 months, repaying £502 per month, total repayable £18,083. Total cost of credit £10,583. Interest rate 69.9% (variable). The lenders on our panel offer loans for 12-60 months, with rates from 5.8% APR to 89.9% APR. The Representative Example is based on all loans paid out by lenders between 19th Apr 2022 and 23rd Dec 2022.

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If you choose to add fees to the loan: Assumed borrowing of £25,000 over 120 months, plus a broker fee of £2,500 and a lender fee of £250 would result in monthly repayments of £345.55, the borrowing rate is 8.6% (variable), the APRC is 11.7% (variable), total charge for credit £16,466.00 and the total amount payable £41,466.00. You can opt to pay the lender and/or broker fees upfront, your adviser will discuss these options with you.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any debt secured on it. All rates vary subject to loan amount, loan type and status. Repaying your debt over a longer period of time may increase the amount you pay.

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