Can my parents take out a loan for me?

Simon81424

Hi Everyone,

Can my Dad take out a loan and give me the money?

A little background - I am about to get married (Less than 6 months away), and my Fiancee and I have paid deposits for our wedding and honeymoon. Prior to this we were carrying a manageable level of debt, but recently my partner has had to leave her job through stress, and will not be returning to her industry. Her role was very well paid, and we were relying on this to fund our wedding and honeymoon. We are now left with bills that need to be paid in the next 4 months, which we cannot pay. She is self employed and has poor credit history (due to a delinquent ex, who is still on the mortgage) so a secured loan would be difficult and a remortgage is impossible.

As a result, I am holding total debt for both of us. We have been comfortably paying this down, but as it appears to any lender that I am carrying a large debt alone it means that I am struggling to get credit or refinance.

<End of Background>

To remedy this, I have asked my Dad to take out a personal loan at a good rate, pay the money into my account, and for me to pay the installments. He is provisionally on board, but we are unsure how and if we can do this.

There is information available about the dangers of this method of lending, but I can't find anything in the way of advice.

• Is this possible / legal?
• Would this method constitute a gift, and therefore be subject to tax?
• Should I approach a financial adviser about this?

Thanks for reading.

[Deleted User]

Yes they can, but they need to find a lender who is happy with it

Gifts aren't subject to tax, unless the giver dies within the next 7 years.

However, if you're already in debt for the wedding an honeymoon already, and need more debt to actually get that far, it may be time for a rethink.

You're potentially getting into a lot of pain for a party and holiday.

Willing2Learn

If your combined income is reduced due to the poor psychological health of your fiance, then can you be sure you will be able to afford repayments on your current debt, plus repayments on an additional loan?

I suggest you do a combined SOA to see where your monthly budget is. You can then work out what is, and what is not affordable.

Edit: And welcome to the forum

MallyGirl

Your Dad can do what he likes with his money - it will become his when the loan amount lands in his account. There is no tax involved.

This board is littered with people who have lent money to family never to see any of it paid back That is the risk your Dad would be taking. You need to think about whether you genuinely can pay him back in a reasonable time frame.
Maybe it is time to scale back on anything in the wedding that is not set in stone - it is not great to start married life with a huge debt hanging over you, especially if your fiancee is already suffering from stress.

PRAISETHESUN

I would be posting on the DFW board and asking for tips on how you can help bring your debt under control - the fact that you would have to resort to something like this makes me wonder if you can realistically afford what you are proposing. You don't need to spend big to have a wonderful and memorable wedding/honeymoon.

As for CAN you do it, on paper I can't think of any reason why as long as your Dad was honest to the lender about what the money was for - many lenders may not be happy with that, but you may find one that is. Keep in mind that if something were to happen and you became unable/unwilling to pay the debt, it would be your father who is liable, not you, and the banks would come after him. It may help to think about/plan for how that might affect your relationship if that were to happen.

AnotherJoe

Can your dad take out a loan. - yes of course he can as long as he passes the lender's checks.
Can he give you the money - he can give it to whoever he wants
Can you pay him back - = same thing as "can you give your dad money"
Gift tax - no such thing.
Financial adviser - no

I suggest you consider if you wish to formalise this arrangement with a note acknowledging you owe this money and what the terms you will pay it back will be.

sourcrates

Hi,


Further borrowing when already in debt is a very bad move, it just leads to more debt, then even more debt when you can`t pay that off, basically its a very slippery slope, and before long your looking at Bankruptcy or many years in debt management.


Try to nip this in the bud now, get yourself over to the debt free wannabe forum and we can help you pay back what you already owe, without adding more to it.

ska_lover

Id agree with the above, getting yourself into debt now would be a bad idea for you and for your parents too. some insight into how your parents might feel....If I took out a loan for my son in your situation it would cause me a great deal of anxiety if he was unable to pay IYSWIM. It is like taking on a guarantor for a person,


IMO the sensible thing would be to cut right back on the wedding or postpone - I don't mean to sound grinchy saying that but it does seem the common sense approach to me

Simon81424

Thanks for all the replies people. To address some of your questions;

- The loan is affordable. Tesco (and a few others) have a rate of 3%, and I've calculated the payments to be within what we can afford.
- I'm not against moving the wedding and honeymoon, but we're going to lose our deposits.
- A lot of you have said that there is no 'Gift Tax', but HMRC seem to disagree. (I can't link to the page, but if you search "how much money can you give as a gift uk" there is .gov.uk that states the maxium is £3000.) Am I reading this wrong?

Thanks again for the responses.

[Deleted User]

HMRC agree with us.

The £3k limit you're reading about is the limit for the gifts not being added to your estate, if you die within 7 years.

-taff

So basically, you're talking about a consolidation loan that you will be paying to your father?
Have a think about whether it's a good idea to get into more debt for the sake of a wedding. Thrwing more money at getting married is a bad idea, if you lose your deposits, then at least you're losing a finite amount of money, and if your fiancee is already financially linked via a mortgage to someone else with a bad credit history, and you have no money to pay the bills, all you're doing is getting deeper into debt, the same as she was with her ex.
You're also not doing your father any favours because as you say, she's out of work and you can't pay the bills. What happens when you can't pay him back because that is a distinct possibility.
You've already found that not all jobs are secure, yours may not be either. To get yourself, your fiancee and your father into debt for the sake of a wedding is a bit mad really.
Go to the debt free wannabe board for help with budgeting.