Helping mum pay off £9700 - should I take a loan out?

chinbergs

Hi everyone

Would be really grateful for some help.

My mum, 63, has £9700 of legal fees to pay off. She is on minimum wage and hasn't made a dent on paying it off. My brother and I want to help her clear it. She pays 100/month at the moment and my brother and I are going to contribute a 100/month each both. so 300/month in total.

The fees are charged at 8% p.a. until the total amount is paid off. (the interest isn't worked into the loan, but charged on the total amount each year.)

My question is, would it work out cheaper to apply for a loan with a term that would allow for 300/month (at around 7.9% atm) where the interest is worked in and so a fixed total sum is paid off? Or would it work out around the same if we just paid 300/month to the company that charges 8% p.a. for life?

I just can't work the sums out.

I'd really appreciate help on this, as if it'd work out much better to apply for a loan, I'd like to get this sorted as quickly as possible.

Thanks so much!!!

milliemonster

I would think it would be cheaper to apply for a loan where the interest is worked in rather than the interest just being charged once a year, especially because the interest rate would then be fixed for the full repayment period, in your mums current situation, there would be nothing to stop them increasing the interest rate would there?

tyllwyd

I would say don't do anything until your mum has talked to one of the debt advice charities (CCCS, PayPlan, National Debtline etc) and got advice on all her options. If you and your brother rush into taking out a loan, that cuts down the choices available and makes the debt your problem, so make sure you have a picture of the full situation before you make a decision. It sounds harsh, but if, say, they recommended bankruptcy as the best option for your mum, she couldn't do that if you had taken the debt into your names.

iolanthe07

Couldn't your mum apply for legal aid?

chinbergs

Thanks for the replies.

Well, my mum initially got legal aid, but because she got the house (so children had a place to live (this was 10 years ago)) she had to pay the legal fees herself. But the amount she earns vs the mortgage payments means she just struggles.

If anyone else knows more specifically whether taking out a loan will be a lot cheaper, I'd be really grateful.

Thanks all.

markelock

only you will know from the specific figures which is cheaper.

what is the cheapest loan rate you can get, over what period will you pay it, and in total how much will it cost you?

do the same with the legal fees.

happy to look at them (for what that's worth!)

Bossyboots

chinbergs wrote: »

Thanks for the replies.

Well, my mum initially got legal aid, but because she got the house (so children had a place to live (this was 10 years ago)) she had to pay the legal fees herself. quote]

This is in incorrect. The Legal Aid Board (as it was then) would have agreed to place a charge on the property for the sum owed to them for the legal fees and they will have paid the solicitors. I would have to check the dates, but I think it may even have been that 10 years ago no interest would have been charged on the sum when the time came to pay it off although that may have been one of the first years. At that time, even the interest payable was lower than 8%. I can't think right now of any scenario where your mum would have had had to pay off her legal aid costs straightaway in the circumstances you have outlined.

I know that doesn't help with your question about a loan, but I am wondering whether she might be able to go down another route and investigate whether she should actually have paid those fees upfront in the first place and whether she can hold someone to account for that. Please PM me if you don't want to put too much info on the forum.