Buy Back Debt

saltshouse

I have recently discovered my teenage daughter has run up debts around £9,000. I have managed to get her talking to me about the problem and she has agreed to let he help her in managing the debt. Fotunately all the debt is with one bank in the form of overdrafts, loans and credit cards. I have spoken with the bank and there are going to consolidate all the debts into one. I have heard somewhere that it is possible to offer the bank a reduced rate to buy off the debt in one go. Has anyone had experience of this

rog2

There is a lot of advice, and you will get it from this site.
For my twopennorth I would strongly advise you to look at all other options BEFORE committing to a 'Consolidation Loan' as this appears to be what you are describing. Check Interest rates on existing debt against the rate offered on consolidation. Also check the repayment period as reduced payments, spread over a longer period, can often increase significantly the total amount you will repay.
Probably best thing to do would be to post a SOA (statement of Affairs) listing debts, current interest rates and payments.
Good Luck.

CLAPTON

i would echo what rog2 has said but also check they dont try to sell you PPI on the loan. if she already has PPI on the debts she may wish to consider cancelling them as they are poor value for money.

what has she spent the money on? has she things she can sell on ebay to help reduce the debts.

its unlikely that the bank will accept a deduced amount (Full & Final settlement) unless the debts have been defaulted ...welll why would they?

lynzpower

Although its fab that you are so supportive, dont allow her to get away with it, by paying any of it off, or taking the control off her. Consolidation isnt the best idea, it does not help with problem spending whatsoever, as I and many of us here can testify. additionally it adds interest over the interest over a longer period of time.

9k is a fair amount of money. What did she spend it on? Can she come here and get some support from us, and work out how to pay it back?

file_wizzard

In general you should never consolidate loans, or take out the “managed loans” offer by the bank themselves as these will be at increased APR’s well in excess of the original loan, as they are repesenative of the risk the bank feels they are taking on board.

The advise you have received so far is excellent, get her to E-bay everything she can, also get her to do an SOA on here, and also look at getting either a second job or some additional source of income.

You should only provide guidance not financial support.

tyllwyd

Are you talking about offering less than the amount outstanding in full and final settlement? I've not got any experience of that, but others here will be able to give advice.

kathfisch

Just wanted to echo what others have said, can your daughter come on here and get advice? Presuming that it has not been something beyond her control, she needs to change the behaviour that had led her into debt, not simply have the problem 'solved' and carry on as before. If she is only a teenager and can learn about money management now that's fab! Better to let her learn now and avoid the spiral of consolidations in years to come.

CFC

Hi Saltshouse, I can imagine you are totally knocked for six at this news. I'm really sorry to hear of the situation your daughter is in.

You can buy debt at reduced rates from the bank. This is a Full and Final Settlement, but as Clapton points out, at the moment there does not appear to be a motive for the bank to accept that. If your daughter couldn't pay her debt, or it was old and longstanding and the bank were just going to be grateful to get anything back, they might be inclined to do it. At the moment, if she is working and they see a reasonable chance of getting all their money, there is no incentive for them to offer a discount.

It sounds awful, but if your daughter cannot afford to pay this debt back, it might be a good move to allow it to default and for the bank to become aware that she cannot realistically pay it back over a reasonable period of time. They may then feel like entering into negotiation. Another reason to let it default is that there is a very clear issue that people who have behaved foolishly with money once often do it again if a third party pays their debts, because they have not truly learned the changed behaviour which is needed.

9k is a massive amount of money, especially for a teenager. What did it go on? Car and insurance etc, or holidays and impulse spending? If car etc, you might consider getting her to sell it. She needs to feel the pain associated with spending money that you don't actually have, especially if you are considering paying off these debts for her. If she can't feel the pain that way, you might want to consider a fairly harrowing and difficult debt repayment plan for repaying the debt to you, (which even if you have no intention of keeping up till the debt is finally paid) which ensures that she learns the consequences to her of spending what she doesn't earn.

piglet6

Hi saltshouse...welcome to the boards and I'm sorry to hear about your daughter's debts - it must have been a terrible shock for you to discover!:o

Like others have already said, please check the terms and conditions of this agreement with the bank very carefully - it does sound suspiciously like a consolidation loan, which often means lower repayments in the first instance, but when you check the t&c, you realise that you have signed up for the long term and overall are paying a horrendous amount of interest.:eek:

Also, as others have said, although first instinct as a loving parent is to "solve" the problem for your child and clear the debt as soon as possible, it is a valuable lesson to learn not to over-spend what you can afford to pay off at an early age. Yes, £9,000 is a lot for a teenager (and you probably need to investigate and discuss how this was spent and what, if anything, she has to show for it), but there are a lot of stories on this board of people who owe far more than this, and who wish that they had learnt their lesson earlier. Personally, we owed £16,000 before Mr Piglet and I had our "lightbulb moment" and, like many others, we wish we had woken up to the debt earlier. It might not be the kindest thing in the long run to eradicate the debt without any "deprivation" on your daughter's part in order to clear it, as it won't teach her not to run up new debts all over again...!:rolleyes:

I wish you and your daughter luck with your future journey, whatever you decide to do, and I hope your daughter knows how lucky she is to have a supportive parent in this situation...:D

Piglet

saltshouse

Some great advice and thaks to all for you input. Just to clarify the position. The bank has defaulted on the accounts and it is they who are consolidating all the accounts into one. As many will apprieciate it is difficult to discuss such things with our children. They would rather take advice from their peers rather than their parents. I suspect the debts have arrisen by time spent away living with her boyfriend and as such she is reluctant to discuss how they came about. It is difficult knowing what to do for best. Part of you wants to help but part of you wants them to learn. What I was considering was buying the deby off the bank possibly at a reduce amount and then allowing her to pay me back at a zero interest rate. She is currently working although the work is what you might class as seasonal with periodic breaks. She earns only basic rates

rog2

saltshouse wrote:

Some great advice and thaks to all for you input. Just to clarify the position. The bank has defaulted on the accounts and it is they who are consolidating all the accounts into one. As many will apprieciate it is difficult to discuss such things with our children. They would rather take advice from their peers rather than their parents. I suspect the debts have arrisen by time spent away living with her boyfriend and as such she is reluctant to discuss how they came about. It is difficult knowing what to do for best. Part of you wants to help but part of you wants them to learn. What I was considering was buying the deby off the bank possibly at a reduce amount and then allowing her to pay me back at a zero interest rate. She is currently working although the work is what you might class as seasonal with periodic breaks. She earns only basic rates

As a parent I, as many others on this board, can appreciate your situation. However, you say that it is the Bank that is consolidating - that sounds a little 'iffy' to me, since they will be totally in the driving seat and could virtually set any conditions they wish. Before agreeing to their (Bank's) conditions,your daughter should seek advice as there may be other, cheaper and more manageable, solutions available to her. Don't allow her to be 'bullied' into something she could regret for a very long time.
Your proposal to pay the bank, and let your daughter pay you at zero interest, is very generous (and understandable) but I have done this, over the years (taking over car loan for my daughter) and I have not found it to be of any long term benefit to her, plus we never saw anything after the first few payments.
There are other solutions, and although your daughter may not like it now, she will respect you for it later on.
Good Luck