HomeDebtAre you a debt H8er?

Are you a debt H8er?

‘Debt’ is quite possibly one of the most interesting pieces of personal finance. It’s relatable, as the majority of Americans have some type of debt (credit cards, student loans, mortgage, car payment, etc). But what is really interesting is the way it can polarize the PF world. I mean just look at the title of my blog. It’s pretty clear I’m not a big fan of debt. In fact, I once wrote a post titled “Good debt is for dumb people.” I do, however, realize that MY opinion isn’t the ONLY opinion.

Debt freedom is not a prerequisite for financial freedom. In fact, I’d take out a $20,000 car loan today if it meant I could have $40,000 in the bank six months from now. Does that make me a PF sell-out? Perhaps I should change my blogs name to Lightly Slap Debt In The Face?

Sure, I don’t have plans to go in to debt anytime soon. Yes, I plan to take on a mortgage one day. No, I don’t think you are going to Personal Finance Hell for having auto loans. Yes, I think you’re stupid for having a degree in Art History if you have $100k in student loans. But at the end of the day, what I think/do/say doesn’t really matter for anyone but myself.

I’m not gonna beg you to pay off your car loan sooner, because what you do doesn’t really effect me. Heck, maybe you’ve found some clever way to leverage car debt and use it for financial gain (doubtful, but possible)? Just because I don’t gamble with bank loans, doesn’t mean you shouldn’t.

We are all adults here so I’m going to assume you can make adult decisions and determine how much debt you’re comfortable with. I have no authority to demand you curse the name of Sallie Mae, or rebuke your love of credit cards. Afterall, I’m just an immature dude, with a blog, and REALLY crappy drawing skillz that likes to throw his $0.02 in on the boring world of personal finance.

So now that I’ve gotten that off my chest, I’d like to ask you a few questions. What debt have you sworn off for life? Any debts you plan to repeatedly incur (i.e. car loan)? Do you use any type of debt as a means to become more financially stable? If so, how?

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  1. I’m sworn off consumer debt, and probably student loan debt. If I ever chose to go back to school in my late 30’s, I’d only go if it was paid for somehow (either by work or with cash).

    I’m on the fence about the car debt. On the one hand, I can easily save enough money to have for the next car. On the other hand, I’d rather put money towards my mortgage now and save 5.75% of the bat vs having money sitting around making 1%. One of our cars is a company car, so that’s a little unpredictable. I can lose it easily if I change jobs or get laid off.

    I hate my mortgage debt and I’m trying to pay off as soon as possible, but am thankful I was able to buy my home on credit. I also like knowing that if I move into a higher COL area, I have options.

    If I were to pick between keeping things as they are or getting rid of credit altogether, I’d keep things as they are. I really think they should make it harder to get credit cards and other unsecured debt. It’s just too easy to get into trouble.

  2. Well. I just hate airing my debt laundry. My husband and I had no help from our parents while attending college (or when we got married) so we have credit card debt from a time when we were both full-time undergrad students working $7/hr. jobs. I hate carrying this debt around, and luckily I just landed an internship of sorts (it’s really a student position) on a military base, so I made a plan to knock all of it out. From this point forward, I swear off credit card debt! Looking at the interest we’ve paid makes me want to cry for wasting all of that money, but without a credit card, we would have starved to death, so I guess you take the good with the bad!

    We’ve also made a plan to have our car paid off 2 1/2 years early by paying down the principle with any extra money that’s laying around. Car loans don’t bother me one bit, and truthfully, neither does buying a new car if you get a good deal. Ours was $8000 off of list price because a) it was last year’s model, b) it had slight hail damage and c) it was a manual and no one wanted it! So we essentially paid a used price for a brand new car. Not bad.

  3. I definitely hear you on debt being a wedge of personal finance. I have a post written up about it that I was going to write about soon.
    As far as the debts I’ve sworn off, one is credit card debt…never again. Too expensive, too many problems that came it.
    Auto debt I’m still not sure about. I have a car loan now that I’m about 6 months into (5 yr term) that I’ll be paying off at some point, but I cant say for sure one way or the other if I’ll ever take one out again.
    I may need to take out a mortgage, but maybe not. I live in a fairly cheap area, so that helps on that front.

    One thing that I do take up an issue with is when you say “I’m not gonna beg you to pay off your car loan sooner, because what you do doesn’t really effect me.” and “We are all adults here so I’m going to assume you can make adult decisions and determine how much debt you’re comfortable with” If anything, I think burst of the housing bubble and the recession has shown us that we are entirely too comfortable carrying around debt levels that could choke a horse. I completely agree with you in the fact that everyone is an adult and should make their own decisions and not get told by you (or me) what to do, but as we have seen the debt levels we carry are something that’s going to turn into a problem in the future.

  4. Good morning, Ninja! Thanks for an important posting. Its heart seems to be “each one of us have a responsibility to make decisions from the perspective of our own situations.” This is indeed an important concept for as all to live by. It builds form what you say in your disclaimer. However I cringed and died a bit inside when I read a line in your 4th paragraph “…what you do doesn’t really effect me.” Aren’t we taking part in a community that discusses important (okay, and silly) matters that have bearing on our decisions – which affect not only our own lives, but the direction of society?
    I’d just like to courteously suggest a caution: such a strong relativistic stance might the PF community’s latent potential to advance economic structure and people’s understanding of how to use it to serve the needs of our ailing society. Thoughts, Ninja and company?

    • Hey Leif,

      I totally see where you are coming from. I wasn’t implying that I don’t care if people pay back their debts. I think everyone should have to pay back the loans they take out, on time. What i was saying is I don’t care if you choose to make minimum payments on your CC balance or pay it off in full each month. As long as people are fulfilling their financial commitments, who am I to tell them at what pace they must do so?

      I don’t, and never will condone, blatantly missing payments when one has the ability to make them.

  5. I’ve sworn off credit cards for life. And car loans. Every car I’ve ever owned has been used and paid for with cash. I plan to keep it that way. 🙂

  6. You forgot to mention that there are some of us out there with credit scores that qualify us for 0% car loans (or amazing co-signing Dads)!
    So when my 10 year old car needed $1200 in repairs (at least) I decided to trade it in and get a shiny new car at 0% for 5 years – that’s free money baby! I’m over the new car thing now, but it made me feel pretty special to be only 19 with a sweet ride that was mine all mine! It was a much nicer car than I had the cash on hand for, and totally affordable per month.
    Debt (for things you were gonna buy anyway) at 0% is totally worth it!

  7. Hmmm…sworn off for life is way to finite for me to think about right now. With (soon to be) 3 kids and only 1 income (thanks hubby!) if we ever ‘needed’ to take on more debt, we probably would. That said, we currently have only a mortgage and plan to buy our next car in cash and are paying for an MBA as we go…so if we were to take on another debt I would have faith in us to pay it off quickly. I don’t sound like a very faithful pf follower, but this works for us and we are thrilled with where we are financially at this point in our life.

  8. No more credit card debt. Ever.
    No school loans. (Thankfully, I’m pretty sure hubby and I are DONE with school.)
    Hopefully, no more car loans. (The car on which we had our last remaining car loan just got totaled (ugh), so once that loan is paid off with the insurance money, we don’t plan to finance a car again.) But that one might be negotiable.
    Mortgage… I’m okay with that one. We have one now and may eventually build a house, but not until after our current home is paid off and we have saved up a nice big chunk toward our next purchase.

  9. We had a car loan and a mortgage, BUT WE PAID OFF THE CAR LOAN TODAY!!! 69 minutes ago to be exact!!! WOOT!!! ONLY A MORTGAGE TO GO!!! I’m excited. 🙂

    To answer your other questions, we swear off all high-interest debt and hopefully will never even need to take on a car loan again. We have budgeted accounts to handle car and home maintenance and future deposits and hopefully it will be big enough by the time we need it to pay for any future cars in cash, woot!

    We do take advantage of 0% interest loans on stuff we were going to buy anyway (put our money in Smarty Pig to make the interest), but we don’t have any of those right now either. I think we’ll just be working on our mortgage for a while. 6 1/2 years to complete debt freedom and counting…

  10. I will never have a car loan. I will always buy my cars with cash. There are plenty of decent cars out there that will not break you. Of course you have to be okay with not having the latest and greatest or even close to that. And I am okay with that. For me, there are more important ways to use my money.

  11. Ninja:

    Your best sentence:
    “Heck, maybe you’ve found some clever way to leverage car debt and use it for financial gain (doubtful, but possible)?”

    Exactly. People convince themselves that debt is either a) horrible or b) a necessary evil, without ever quantifying anything. If you can find a 1.9% car loan and a financial instrument that pays more than that, it makes sense to finance the car. Taking the bus every day for years because you’re saving up to pay cash for a car is self-defeating. Especially now, when car dealers are desperate to sell.

  12. I have totally sworn of credit card debt for life. Never. Ever. Again…..will I pay one red cent of interest to a credit card company.

  13. I have totally sworn of credit card debt for life. Never. Ever. Again…..will I pay one red cent of interest to a credit card company.

    Other types of debt are more complex, I think. I think that going forward, it will be unrealistic for most families to pay for college out of pocket, so I think that student loans are a necessary evil, but should be managed responsibly. In other words, I agree that an art history major shouldn’t be taking out $100K in loans. In fact, I really think that colleges and universities should be developing some clearer guidelines about what a reasonable amount of money to borrow for an education is, relative to a given student’s major. (I don’t know what those guidelines are, but someone should develop them and put them out there!)

    Auto loans…eh. I have one, but it’s pretty low interest. If you can comfortably afford to buy a car in cash without sacrificing saving for retirement or a down-payment, obviously I think you should do it. If not, again, borrow responsibly, and keep the term of the loan to as few months as possible.

    I really think that borrowing boils down to common sense. Don’t borrow for consumer goods, don’t borrow at high interest rates, and don’t take on more loan than you can afford (i.e., so much loan that you can’t save). Unfortunately, too many people struggle to apply these basically sensible principles to their lives, and that’s where you get people laying down the gauntlet with statements like: “all debt is always bad under any circumstance,” etc. because too many people get themselves into trouble.

  14. I’m just repeating what I’ve said in previous discussions of this type here, though obviously I’m in the minority and only Greg M. seems to agree with me. Despite the fear-mongering of the Suze Ormans and Davd Ramseys, debt is not necessarily a bad thing. Say I find a $500 item for 30% off and the only way I can pay for it is to charge it and pay for it over two months. I have to pay $25 interest. All this means is that I get the item for 25% off, where otherwise I may have had to pay full price.

    As for car loans and mortgages, the latter is almost unavoidable, but the former may not be such a bad thing if you get a low interest rate (or better zero). I just paid 30% down for a car and financed the rest at 3%. If inflation returns at 3% I’m breaking even. If you take a 30-year fixed rate mortgage, almost inevitably you’re going to be paying with cheaper dollars over the course of the loan because of inflation. Yes, you’d do better with a 15-year note, but not as much as it may appear if you don’t adjust for inflation, and you’re also tieing up a lot of money that you may need for other purposes.

    That said, unsecured credit card debt is almost always a losing proposition, and should be avoided as much as possible.

  15. There’s a whole lot of that good debt bad debt dragons up the yin yang dichotomy going around.

    Personally, I would stay the hell away from any debt involving school payments, car payments, consumer debt or an unaffordable mortgage.

    Financial freedom is a whole ‘nother ball game. But with your salary, I’m sure you can totally pull it off if you stick to your guns. 😀

  16. If you NEED it, going into debt is acceptable. If that debt is UNSUSTAINABLE, going into debt is NOT acceptable. I truly believe both conditions must be satisfied to go into debt. However, the main problem most people have with this statement is if debt is sustainable or not. Only you can decide that.

  17. After being in debt from student loans, I wouldn’t want to get back into debt anytime soon. If I go back to school, it would have to be after a year where I have made enough money to pay for it. I want to pay off my student debt as soon as possible.

  18. Sissy Fight Debt in the Face, perhaps?

    I swear I will never carry a balance on a credit card. Some people say it’s okay to carry a balance if you game the system with a 0% rate while using the money to earn interest on it elsewhere, or to pay off other debts, but I find that methodology dangerous.

    I want my student debt and car debt GONE ASAP, but I’m not sure I’d never get a car loan again. It really depends on the situation. I’d only buy a car if I need one (i.e. old car is lost cause). And, if the economy is crap like it is now, I might qualify for a 0% loan (I’ve heard about it happening now). Yes, in the previous paragraph, I mocked going with 0% “loans”, but this one would be less dangerous (i.e. no accidental spending on card/missing rate changes, etc.).

    Anyway, I’ll probably also get a mortgage. But right now, renting is still quite a lot more financially logical and feasible, so I’ll cross that bridge when I get to it.

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