Complicated "Family" Loan Situation

TerminalJunkie

Hi all,

Sorry if this is in the wrong place but I'm looking for some guidance on a debt that is / was owed to family (in-laws) that has gotten rather complicated...

Over a period of about a year I borrowed around 11k from a family member and paid back 2k before a change in circumstances prevented me from making any more payments... Most of the debt was loans taken out in their name but on my behalf and as a result of my non-payment they struggled to keep up - they then took a larger loan over a longer period of time and used this to consolidate my owing (9k) and some of their own personal debts.

About 6 months after doing so I was able to start making payments again and this is where it gets complicated....

To date I've paid them approx 15.5k over a period of 6.5 years and have recently asked them how things stand as I had no knowledge of how much they borrowed, for how long or the APR etc and just trusted them to keep me posted. It turns out they borrowed just under 6 times what i owed over a period of 12 years at a variable rate which seems to have ranged from 8.2% - 10%, they also took out PPI and have claimed on this although I continued to pay them during this period.

Using this new information it looks like I've been overpaying on my "share" of the loan each month and effectively paid my portion off early because of this - a spreadsheet designed to work out loans with variable payments suggests that using a fixed (for simplicity) rate of 10% the 9k and associated interest was paid just over 2 years and I've "overpaid" by approx £3500. Ironically the total amount I've paid them to date is very close to what it would have been over the full 12 years term.

Both of us agree on what was borrowed / consolidated but not on the payments made although I have worked it out the best I can they dispute it. I think this is more down to their own personal arrangements and how they have "allocated" the payments between them as I'm 99% sure the overpayments I've made have gone in their pockets and not to the loan company...

Can anyone offer some guidance on where I go from here? Whilst i'd rather not fall out with them as far as I can tell I've more than settled the debt and for for fear of sounding flippant there's a good chance they owe me instead.

Thanks for reading

claret_mike

how did you make your payments - cash or by bank transfer.

Have you got proof of payments? Receipts? Have you got a written agreement?

Jinx

If you only have a verbal agreement and you have paid your dues I would stop paying them (but you will lose the relationship I would imagine)

TerminalJunkie

claret_mike wrote: »

how did you make your payments - cash or by bank transfer.

Have you got proof of payments? Receipts? Have you got a written agreement?

Hi,

Sorry should have said. no paperwork at all I'm afraid and up until recently was completely in the dark over what they had done - was grateful for the help at the time and trusted them to keep track of the payments as without the info on their loan it would have been difficult for me to work out anyway. Everything was done in cash although I did offer bank transfers a few times they always refused.

I realise its going to be difficult to prove anything either way and may simply have to say to them enough is enough and stop payments - will cause a major falling out but at the same time I think its unreasonable for them to expect me to carry on for the remainder of the 12 years? I guess the worst thing they could do is take me to court over it and I could argue the overpayment in response?

Thanks again

AFK_Matrix

If payments were all in cash and there was no agreement they can take you to court all they want they won't be able to prove diddly so stop paying and accept that you probably won't have a relationship with this family member anymore.

claret_mike

I think you are just going to have to sit down with them and work it out til you both agree if you want to keep away from mass falling out.

You cannot prove you have paid yet have calculated this amount?

They have not recorded what they have received so how can they prove what they have had?

Neither party is on strong grounds to be fair. No agreements are in place so I would also point this out.

Have they told you what they think you owe? How have they calculated this?

I think if both parties value the relationship you need to try and come to an agreement, if this means you paying a few more payments under the agreement once paid that is the end- even though you may feel as though you shouldn't it may be a small price to pay in the long run...

TerminalJunkie

claret_mike wrote: »

I think you are just going to have to sit down with them and work it out til you both agree if you want to keep away from mass falling out.

You cannot prove you have paid yet have calculated this amount?

I've been paying the same amount at two and four weekly intervals and can remember when / by how much they have varied over the years, I've also been over as many old bank statements as possible and used the amount of cash withdrawn at those intervals to confirm this as much as possible. The two / four weekly payments have had to be converted to calender monthly as the spreadsheet I used wont allow for variable dates just payments on a monthly basis, between this and my working out of the payment history it wont be 100% accurate but fairly close on the grand scale of things.

They have not recorded what they have received so how can they prove what they have had?

They can't - bit of a stalemate sadly

Neither party is on strong grounds to be fair. No agreements are in place so I would also point this out.

Have they told you what they think you owe? How have they calculated this?

Not really, we've been able to agree on the initial 9k that was consolidated and they've accepted that some of the payment periods / amounts I have may be correct but dispute others. Since then I've been able to confirm that some of the disputed periods and amounts were correct but still need to take this up with them. At no point have they offered any thoughts on what they think has been paid and may or may not be owed.

I think if both parties value the relationship you need to try and come to an agreement, if this means you paying a few more payments under the agreement once paid that is the end- even though you may feel as though you shouldn't it may be a small price to pay in the long run...

I'd rather not fall out with them but even accepting a generous margin of error in my calculations everything points to it having been paid off and then some so not that keen on giving them anything more - I honestly believe I've overpaid by about 3.5k but cant ever see them accepting that and suspect they will demand payment continues for the remaining duration of the 12 years simply because that's how long they will be paying it for.

See where your coming from - my replies in bold above.

Thanks again

claret_mike

Still a little unclear having looked at with fresh eyes/brain today.

You state that you repaid 2k off from the 11k. How have you calc this. Have you made £2k worth of payments or did you pay more but this equated to £2k reduction in the debt? If you are stating that you made £2k in payments before your circs changed then your debt will not be 9k as you have not accounted for interest payments.

Whilst your circs had changed then you will have still been liable for capital and interest on the loan so whatever the payments were on that loan would have been stacking up for 6 months. So say these were £200 per month - your £2k repayment will effectively had been wiped out by £1200 in missed payments effectively as this will have been added to the balance of what you owed.

Neither of you can clearly confirm what has been repaid. To me, you both need to agree on an amount you both are happy with and understand that without this you will both be at conflict.

You both need to accept that you are both at fault for not keeping good records and that as a result both of you may feel like you are losing out in some way but ultimately you need to draw a line under it. Without this, you are heading for one almighty fall out.

For me you need to remember how they helped you out when you were struggling. For them, they need to accept that you may have already paid what was due and that you should not be liable for all of their debt but you will have contributed to their debt issues. Did they have to take more borrowing to cover your missed payments etc?

Not a nice situation but providing both sides can avoid further conflict and digging of heels etc then there is still hope that you can work through this.

TerminalJunkie

claret_mike wrote: »

Still a little unclear having looked at with fresh eyes/brain today.

You state that you repaid 2k off from the 11k. How have you calc this. Have you made £2k worth of payments or did you pay more but this equated to £2k reduction in the debt? If you are stating that you made £2k in payments before your circs changed then your debt will not be 9k as you have not accounted for interest payments.

Whilst your circs had changed then you will have still been liable for capital and interest on the loan so whatever the payments were on that loan would have been stacking up for 6 months. So say these were £200 per month - your £2k repayment will effectively had been wiped out by £1200 in missed payments effectively as this will have been added to the balance of what you owed.

Neither of you can clearly confirm what has been repaid. To me, you both need to agree on an amount you both are happy with and understand that without this you will both be at conflict.

You both need to accept that you are both at fault for not keeping good records and that as a result both of you may feel like you are losing out in some way but ultimately you need to draw a line under it. Without this, you are heading for one almighty fall out.

For me you need to remember how they helped you out when you were struggling. For them, they need to accept that you may have already paid what was due and that you should not be liable for all of their debt but you will have contributed to their debt issues. Did they have to take more borrowing to cover your missed payments etc?

Not a nice situation but providing both sides can avoid further conflict and digging of heels etc then there is still hope that you can work through this.

Thanks for the detailed reply :-) I've realised that some of my original post was a little unclear at times...

In effect I only managed part payments on the 3/4 due before they consolidated everything, I then missed the first 3/4 full payments of this larger loan before getting on top of things. They didn't take out any extra borrowing to cover either of the missed payment periods so that at least is one less complication.

Your were right about not factoring in the interest on the missed payments, I've been able to calculate this on the consolidation loan but not the original ones that came before it so have added £1000 to the amount owing at the time of them consolidating to try and allow for this.

All number crunching aside I agree with what your saying about sharing the blame for lack of records, them helping out and the headaches when I fell behind. In that sense I do believe that whilst technically quite a large overpayment has been made to them I'm happy to treat it as a "thank you and sorry for the hassle" and call things quits - just not so sure they will be happy to do so but will have to cross that bridge when we next to meet to discuss things.

chris-j

I think the fact they refused the bank transfer option speaks volumes.

This should be taken as message to everyone about lending/borrowing in families - DON'T, but if you do both sides should keep reconciled records.

Sounds like you probably have paid enough but you are at their mercy.
Their PPI claim is irrelevant (and I bet they make a miselling claim to).

That said jf there is nothing in writing it is a moral question.

debtcutter

When you say that you're trying to use cash withdrawals detailed on your statement as proof of payment to them, are you showing them similar amounts appearing at similar, or exactly the same dates of the month/week?

I can see why this is such a difficult issue for everyone involved, no record of agreement at the start, no documentation etc.

Although it sounds like you're acting reasonably now, it doesn't sound like you've been blameless throughout (of your own admission, which is commendable and rare around here), but it also sounds like the same applies to the other people.

TBH - if they had to take the debt over 12 years because they couldn't afford repayments after you stopped paying them, I don't think it's fair that you pay what you would have repaid originally, as they should never have had to extend the loan.

If your part of the loan was effectively £11K over 12 years (as if it wasn't for you not paying them, they wouldn't have had to take this huge loan to refinance their own credit) then @ 10%APR that would end up costing £18,358. A lot more than you even roughly estimate. (it should be less than that though, as you say that you paid around £2K off originally, from what you've said)

How much were the monthly payments at the start of the original loan?

From that we can work it out a little more accurately, if you hadn't missed a payment at the point you had paid off £2K so we can roughly work out what was left outstanding at that point, which will effectively be the amount that they had to borrow because of you not being able to pay.

That, IMO, is what you should have to repay. The amount that they had to refinance over 12 years, less what you've already paid since then and if you've made overpayments to them since, less the interest they would have saved in the other payments.

Really feel for all of you. Hope you can sort this out.

As others have said, keep trying to remain calm and document every conversation and transaction from now.