It’s been a bit quiet recently because I’ve been collecting receipts all month. Once I’ve got a month’s worth, I can write a scintillating article about shopping expenditure; until then, I’ll just have to content myself with a short piece on debt expenditure.
I’ve got quite a few debts; modern capitalist economies really are predicated on the notion that debt is good. Although this raises a lot of hackles, but it doesn’t bother me too much. If we’re going to have money, it might as well have a high velocity, and a lot of the objections are from people I’m not predisposed to trust. Also, there’s very little I could do on a practical level except to stop using money entirely. Not impossible, but very much on the outskirts of practical.
I will never link to Alex Jones again. I promise.
Anyway, the basic principle of debt is that you are leveraging your future earnings to get something done now, goddamnit. As a child of New Labour, I was fortunate enough to go to University, but in doing so, I got to experience this concept for the first time in the form of student loans. Fairly simple - the government lends me £12,000 over three years to go to university, I pay it back with interest once I’ve got a decent job. I win, the government wins twice (as it gets a higher-rate taxpayer out of it too), and society at large wins as well. Certainly in theory.
Student loans aren’t my only credit arrangement, of course; I’ve borrowed money since for various reasons. I don’t really have any objections in principle, it’s mostly a matter of degree.
So what does my current expenditure on loans look like? And where does it go?
|Item||Monthly payment||Months left||Provider|
|Student loan||£300||3||Student Loans Company|
|Personal loan||£430||22||Nationwide||Bathroom loan||£100||12||Barclays Personal Finance|
|Boiler loan||£80||36||Hitachi Loans|
It’s not particularly pretty; even on my income, this is too much money on debt repayments, any financial planner can tell you that (it’s not even the end of the story; there’s also credit cards and an overdraft to consider, but I’ll talk about those separately). Just on common prudence grounds, it’s imperative that I reduce these payments; fortunately, the student loan is almost repaid and the mortgage becomes much cheaper in the near future (new fixed-rate deal); that reduces the total to around £1500, which is somewhat more sensible.
In terms of who gets the money, Nationwide - a building society - gets the biggest single share, receiving over half of it. The Student Loans Company - a non-profit - is another significant beneficiary, at least for now. “Just” a quarter of the current total - £480/month - goes to Evil Private Companies.
A loan can be repaid at any time, so in theory I could shift that monthly expenditure to Nationwide just by taking out a second loan; the amount of detriment to the losing companies is precisely the interest they lose from my doing so, minus any early repayment fees. The Hitachi one is worthwhile, so I’ll look at that; the Barclays one is not, but is nearly repaid. The car is actually a PCP with an interest rate of 0% (I guess they make their money from the VAT dodge), so the point of moving it within the term is more or less nil.
Future loans can certainly be taken out exclusively with mutual organisations. Building societies are OK, but alternative models do exist; credit unions are a better model, but they aren’t that popular in the UK, and my local one collapsed in 2012 - I’d actually filled out the membership form the day before they went.
Interestingly, it seems SYCU have expanded to York; they have a branch in the city, at least. I’ve emailed them to ask about membership. I’ll see if I can move a subset of my concerns there; although I’d be surprised if they can do mortgages!
The mortgage itself is an interesting thing; I’m paying it instead of rent, and that in itself makes it great. I’ll see if I can write more about the Evils Of Renting later in the year.