Paying parents debts...

misslissa

Hi,

My parents owe about £17k without the means to much more than meet minimum payments. Not that I want to get into the why's eyc but this is due to ill health. They own their home but credit rating is shocking.

We are looking at taking out a loan for them and paying it off over 3 years. We want to pay it for them.

My question is, is the loan the right idea or is it doable without? We can afford about £500pm but we worry we won't be making a big enough impact trying to clear them unless we consolidate the debts and at least then we can see it going down.

I'd rather not take out a loan but it's affecting their health and that obviously affects me. What would you do?

I'm not looking for judgement, just sound financial advice.

HappyMJ

Tell them to consider not paying any more. They don't have to make the payments if they can no longer afford to.

Don't take a loan in your name. Give them cash if you have but don't take a loan.

boliston

There is a risk if you pay the debt off that they could take out new debt so you would be back at square one just with debt of your own as well.

DandelionPatrol

Consolidation of debts is rarely a good idea and the consensus here is not to do it unless you have good reasons. For example, 'cutting it down to a single payment' is not a good enough reason.

In your case, you are proposing not only to take a consolidation loan but also to transfer the debt into your names. If 'we' is you and siblings, then it only becomes worse,

• you will link your credit records and any defaults by one will affect all of the others and spouses.
• If one of you cannot make the payments, the others will have to pick up the slack - you are each 'jointly and severally' liable for a loan, which means that there is no 'your share' 'my share'

And worst of all, if your parents die before you clear the debt, you will still be left to clear the loan, whereas if you do not take on a loan, then the debts die with your parents.


The only sensible thing to do is to leave the debts exactly where they are and use the money to pay them down as you go. You need to do a debt snowball, paying down highest APR's first. And watch out that your parents do not start piling on new debts as your efforts improve their credit.

Movingon5464

I think you should sit down with them and work out if they can actually afford the minimum repayments. List all income and expenditure and if there is a shortfall then they could consider starting a debt management plan. They could go through a free charity such as Stepchange or Payplan so no need to pay fees. The PRO of this is that creditors are very likely to freeze interest so the payments they make go towards reducing the balance and not just paying the intrest. The CON is that as they will no longer be making contractual payments the creditors will issue defaults which will show on their credit files for 6 years but as you said their crddit files are shocking now then it won't make much difference. If they don't need to remortgage or take out credit in the next 6 years the defaults won't really affect them. A debt management plan budget allows for reasonable living expenses but not extravagent extras. If you wanted to help them you could treat them to the things they probably won't be able to afford themselves while on the dmp e.g. take them out for dinner or take them on shopping trips. This way they take responsibilty for their debt and you get to help them out without risking your credit rating.

lyndseyb2009

I was in a similar situation 6 years ago - my parents had mortgage arrears and they where at risk of loosing our childhood home. They also had debt arrears with Welcome Finance and where being hounded constantly by them & they where adding crazy charges and interest onto their account.

My dad was really ill (he had complications from Diabetes and was in the process of loosing his legs) and therefore was unable to work (hence the reason they fell behind). At the same time my mum was off work with a frozen shoulder (she's a care worker so using her arms extensively is a requirement for the job). I had a teenage brother & sister also at home with me so I took it upon myself to sort the finances out......

I took out a consolidation loan for most of the debts and set money aside to cover the mortgage for a few months and for a while things where good. Then my company cut my hours and I too struggled to pay the repayments as I was just not earning enough. I had just graduated and was struggling to find a job that would pay me enough to keep up with repayments.

I ended up going into a DMP and only now after 5 years of repayments have I been able to see light at the end of the tunnel (I'm just about to finish with a lump sum payment). It's taken it's toll on my credit report - I have defaults and have obviously not been able to come close to owning a house...... a probably won't for at least another year or 2.

I would strongly suggest that you don't take out any credit that you may not be able to afford in the future..... I think as others have suggested it's probably best that they enter into their own DMP or even IVA - if their credit is not great to begin with, to be honest the affect on the credit file will probably be a small price to pay in order to gain some sense of control and freedom again.

The best thing you can do for your parents is to be there for them while they are going through the plan - and as Movigon says - treat them to dinners and little guilty pleasures now and again so they can enjoy life while also repaying the debts.

xxx

andyfromotley

Paying off your parents debt with cash you already have saved = an OK idea (and a very kind act.

Paying off your patents debt using money you do not have = terrible terrible idea.

I do understand your desire to help and it is admirable. However perhaps a better way of providing help may be to assist your parents by sorting out a debt solution for them. National Debtline should be your first port of call.

owlet

Be with them & phone one of the free debt advisory services like Stepchange or National debtline. They are excellent.

Don't pay for help, whatever you do.

Sazzie23

I'd also suggest helping them go through step change, if they are worried, no one else needs to know and there won't be a sign outside the house saying 'debtors live here'. I know if makes you feel like a failure and is hugely confronting at not being able to deal with your debts, but stepchange should be able to identify the best way for them to go forward. In the futiure you might be able to help them with major purchase, like if they needed a new bed etc

i am sure they know this, but you are very kind to want to try to help them, and I'm sure they feel confident that you will help them do the right thing or they would not have confided in you.

Some other agencies are available such as Christians against poverty and national debt line, but please don't use any fee paying agencies, the money they can pay should go towards their debts.

Also please make sure they are getting all the benefits they are entitled to.

ampersand

#6 - lyndsey, you have done a remarkable thing. Well done.

I wouldn't recommend this path for op's parents or situ, though.

I am posting so that CAP contact is here for your parents, misslissa - or anyone else to see.

Martin recommends them, along with the others mentioned, Stepchange and NDL.

They do not proselytise. Their record and reputation is outstanding.

https://capuk.org/

lyndseyb2009

Thanks Ampersand - It's been a real challenge in the last 5 years - I've been building a career and the only disappointing part of getting salary increases has been knowing that it's not really an increase in my money that I can spend - it went straight into the plan. It might sound selfish and that's not my intention at all, but I will be 100% glad to see the back of my DMP (which actually ended yesterday as I am now in a position to settle my 5 outstanding accounts within the next 2-3 weeks in full)!

I agree that this is not the right way forward for this person - noble as it is, it's not the right path.