Some Advice

nickp10

Hi..

Bit of a long story but here goes. In Oct 2005 my dad took out a loan for £50,000 over 15 years APR 8%. My brother borrowed £20000 and pays £300 per month whilst my dad who borrowed £30000 pays £200. My brother wants this debt to paid off quicker than the 15 years and wants to stops paying in 2 years?? Is this fair on my dad?? Conisdering he is paying more I can see his point but my dad doesn't. What would be a fair amount for my brother to pay back? I can see this causing arguments in the family in a few years and wondered if someone could say what a fair amount he pays back is. Also could the loan be paid off before the 15 years is up I suppose this would save alot of arguments..

If anyone can advise I would appreciate it..

garbaldisham

Just to clarify, is this one loan taken out jointly, or did your dad take out a 50k loan and then gave your brother 20k of it? If the latter does your brother send his repayments directly or does he give your dad £300 a month?

nickp10

The loan was taken out by my dad, he pays my dad 300 directly to him

anh1904

Presumably your Dad did this to help out your brother?
Your brother now wants to end the deal, because presumably he is in a position to do so?

Perhaps when the loan was taken out, the rates your brother could have borrowed at meant he would have paid significantly higher rate of interest, and maybe payments of £300 (or more) per month for 15 years?

It was a win-win situation when the deal was made, and presumably the split in payments was agreed as it worked for both parties, whatever and however the situation gets resolved, it needs to be to the agreement of all parties there as well.

You can mediate perhaps as an impartial bystander, but your brother can't really just stop paying, as that would be totally unfair on your dad, who presumably would struggle to meet the extra £300 payments?

Ames

You need to find out if the loan allows overpayments. If it does, then your brother can just increase his payments until his share is paid off. Or save up extra and pay chunks of it off. But not all loans allow overpayments.

I guess another solution would be for him to pay more to your dad until his share is paid off, and your dad just put the extra in an ISA or something until the loan's at a level where it can be settled with what's saved, or when your brother stops paying because he's covered his share then your dad will have the money there to keep paying the extra payments.

You'd need someone who's good at maths to figure out the interest side though.

nickp10

What would be a fair amount for my brother to pay back?? I have looked at loans on the internet and if he took a £20000 over say 8 years that would be £28800 paid back if the repayments were £300. Don't want my dad to be left with the repayments but then again if he is not paying his fair share then I can understand my brother's point

little_miss_muppet_face

nickp10 wrote: »

Hi..

Bit of a long story but here goes. In Oct 2005 my dad took out a loan for £50,000 over 15 years APR 8%. My brother borrowed £20000 and pays £300 per month whilst my dad who borrowed £30000 pays £200. My brother wants this debt to paid off quicker than the 15 years and wants to stops paying in 2 years?? Is this fair on my dad?? Conisdering he is paying more I can see his point but my dad doesn't. What would be a fair amount for my brother to pay back? I can see this causing arguments in the family in a few years and wondered if someone could say what a fair amount he pays back is. Also could the loan be paid off before the 15 years is up I suppose this would save alot of arguments..

If anyone can advise I would appreciate it..

So your brother pays back in total £54,000 for 20k and your dad pays back £36000 for £30k.. .. so in total interest is £40k.. Wow !!
cant help with deciding how much should be paid back, but dont think payments sound very fair anyway, i know your dad is helping out your brother but your bro seems to be paying an awful lot back for what he got originally, can they not get a settlement figure and then adjust payments accordingly to make it a fairer payment..

anh1904

At 8%, then the repayments of 500 are about right. The proportions borrowed and repaid may not be right, but that is a matter for agreement and discussion within the family.
If there were no fees added, then the interest month 1 would have been £333.33, but if it is an unsecured loan, everything would be added at the start usually.

Everyone needs to talk about what they want to do, and what options may exist to allow them to do them.

Ames

My solution would be to work out what the total repayable is, and for your brother to pay back 2/5ths of it, since he had 2/5ths of the money. If it's paid back early and saves on interest then work out who's paid most of the interest over the period and split the savings proportionately.

But really it needs to be worked out amongst the family.

Was it a secured loan? Because the FSA only regulates unsecured up to £25k and it's very unusual to get such a high unsecured loan. If it's secured on a house then it might complicate things more because whoever owns the house might feel they 'deserve' to pay less because they're risking more etc.

I think this one is more down to family relationships and politics than it is finances and maths to be honest.

nickp10

Hi, thanks for all your advise, I think it was a secured loan I'm not sure. Think this will cause family arguments in the future but as you guys have said the only thing they can do is work something out

podperson

This sounds like a rather poor deal all round as over the full 15years they will have to pay almost double the amount back and am sure must be secured for that amount.
First of all your dad needs to check whether it is possible to make overpayments on the loan and what penalties there would be for paying off early. I don't think your brother can be justified in stopping paying in 2 yrs time as he will only then be paying back around £25,000 so he would be paying £5k in interest while your dad would be stuck with a massive £45k in interest over the full payment period and if he couldn't afford the higher payments could be putting his house at risk.
If your brother can afford to make overpayments but the loan company won't allow it then perhaps he could pay his share into a savings account which your dad could then use to pay off the extra amount on the monthly payments, therefore your brother wouldn't have to be bothering with it anymore but your dad would still have the money available.