Help - Daughter in debt.

Can anyone help?
20 yr old daughter has finally told me the extent of her debts - £12,000. (car loan, credit cards)
I'm still reeling from the shock, she's such a hard-working, sensible, clever girl.
I could analyse 'why' forever - bereavemnt, too tempting mail shots etc. but I'm just desperate to help her get straight.
She only earns £10,500pa and is at the start of a promising career in Law.
I don't have £12,000 to give her and anyhow feel she needs to pay this herself, life's lessons learned and all that.
She's never missed any payments but has very little money left to live on and I'm afraid she will keep using credit cards to make ends meet and therefore get no further forward.
She would like to get a loan of £12,000 over 7 years or so, but has been unable to get one so far.(Her bank, HSBC said no to 12K but offered her 15K
over 7 years!)
I am planning on moving or extending my home over the next year and so am afraid to limit my borrowing capacity by getting a loan out in my name but would be happy to act as gaurantee if that was posible, but would that also limit my own borrowing capabilities? Anyone know anything about acting as 'gaurantor'?
Any advice would be very gratefully received.

Comments

  • Eliza252
    Eliza252 Posts: 449 Forumite
    Can you persuade your daughtor to post on here?
    It would be helpful to know her budget etc - as you say, there is no hope of her paying off her debt if she doesnt start to make ends meet and the first step is to work out where all the money is going - it may difficult for your daughtor to accept advise from you - if your close family its difficult for one or the other person not to be offended or resentful at advise over personal finances - there is however a wealth of impartial advise available here or from your local Citizans Advice Bureau...

    I would seriously advise you not to lend her money - again, as you say - its her lesson to learn unfortunately. However, my mum once helped me out with a credit card I was making repayments on, as she was able to apply and get a 0% interest card (I was rejected) - then she put me on the card as a joint holder and I was able to transfer my balance so I wasnt earning any interest while i payed it off...
    I've made my debts bite-size too depressing to look at all at once so am handling them one at a time - first up Graduate Loan £1720 paid off! only £280 to go!!!
    Money to raise for tuition fees: £3000
    When you get to the end of your rope, tie a knot and hang on!!
  • ms_london
    ms_london Posts: 2,852 Forumite
    First Post Photogenic Name Dropper First Anniversary
    jane528 wrote:
    Can anyone help?
    20 yr old daughter has finally told me the extent of her debts - £12,000. (car loan, credit cards)
    I'm still reeling from the shock, she's such a hard-working, sensible, clever girl.
    I could analyse 'why' forever - bereavemnt, too tempting mail shots etc. but I'm just desperate to help her get straight.
    She only earns £10,500pa and is at the start of a promising career in Law.
    I don't have £12,000 to give her and anyhow feel she needs to pay this herself, life's lessons learned and all that.
    She's never missed any payments but has very little money left to live on and I'm afraid she will keep using credit cards to make ends meet and therefore get no further forward.
    She would like to get a loan of £12,000 over 7 years or so, but has been unable to get one so far.(Her bank, HSBC said no to 12K but offered her 15K
    over 7 years!)
    I am planning on moving or extending my home over the next year and so am afraid to limit my borrowing capacity by getting a loan out in my name but would be happy to act as gaurantee if that was posible, but would that also limit my own borrowing capabilities? Anyone know anything about acting as 'gaurantor'?
    Any advice would be very gratefully received.

    You sound like my mum :0) - I have to confess that I put my parents through equally as much stress when I was running up my debt.

    Do you know what the rate is on the HSBC they have offered your daughter? I dont usually agree with consolidation loans, but on this occasion and so long as your daughter stops with the credit cards/overdraft & gets rid of them, i would suggest that she takes the £15K loan over 7 years, she should give you the difference of £3K that you can look after for her - and this should be used to pay back some of the loan, not for anything else. I would suggest that she doesnt take the Payment Protection Insurance as it isnt worth the paper its written on.

    I dont think you should borrow for your daughter, as if the debt is in her name, it will teach her that if she doesnt pay it on time there will be repurcussions for her, whereas if it were in your name, she wouldnt fully appreciate this.

    Perhaps sit down with her with a budget & encourage her to stick to it, save a little etc etc. But on this occasion tell her to go for the consolidation loan.

    Ms_London
  • roger56
    roger56 Posts: 478 Forumite
    How much is the car loan and what is the rate?
    Is it viable to get a cheaper car and get rid of the loan? Check for early repayment penalties etc first.
    I agree with previous posters, you should resist putting your name to your daughters debt however much you may love her!
  • Xbigman
    Xbigman Posts: 3,884 Forumite
    Name Dropper First Anniversary First Post Combo Breaker
    I'd advise against consolidation. It is merely moving debt around and its always better to repay debt. Having lots of little debts means you can address one at a time and it feels like you are getting somewhere when you clear one. If you or your daughter can post a budget we can better advise you on this.

    I'd be very, very carefull about being a guarantor. I did this for my brother and they put the loan in joint names. I only found this out when I applied for a loan yeas later and it showed up as still active (he had extended the loan and not told me).
    Regards



    X
    Xbigman's guide to a happy life.

    Eat properly
    Sleep properly
    Save some money
  • mummytofour
    mummytofour Posts: 2,636 Forumite
    Xbigman wrote:
    I'd advise against consolidation. It is merely moving debt around and its always better to repay debt. Having lots of little debts means you can address one at a time and it feels like you are getting somewhere when you clear one. If you or your daughter can post a budget we can better advise you on this.

    I'd be very, very carefull about being a guarantor. I did this for my brother and they put the loan in joint names. I only found this out when I applied for a loan yeas later and it showed up as still active (he had extended the loan and not told me).
    Regards



    X



    Yes it is moving debt around BUT it could mean she has more cash each month so can live within her means, also she will have a fixed rate, a set amount going out each month AND will have her cc debt gone in 7 years, if this lady is only making min repayments on her cc it will probaly take her many many years to pay the cc off, the way it is now, on 10500 i shoul dthink she has little left to make extra payments, to pay debts off quicker.
    So sometimes moving debts around is helpful.
    Debt free and plan on staying that way!!!!
  • jane528
    jane528 Posts: 18 Forumite
    Eliza252 wrote:
    Can you persuade your daughtor to post on here?
    It would be helpful to know her budget etc - as you say, there is no hope of her paying off her debt if she doesnt start to make ends meet and the first step is to work out where all the money is going - it may difficult for your daughtor to accept advise from you - if your close family its difficult for one or the other person not to be offended or resentful at advise over personal finances - there is however a wealth of impartial advise available here or from your local Citizans Advice Bureau...

    I would seriously advise you not to lend her money - again, as you say - its her lesson to learn unfortunately. However, my mum once helped me out with a credit card I was making repayments on, as she was able to apply and get a 0% interest card (I was rejected) - then she put me on the card as a joint holder and I was able to transfer my balance so I wasnt earning any interest while i payed it off...


    You've hit the nail on the head. Every time I try to discuss it with her she gets cross and upset. I really do stay calm and haven't ranted at her and not once have I reminded her of the many times I warned her to beware of credit cards!
    She seems to be so miserable about the situation that she can't see any way ahead.
    She has promised to go through her 'figures' with me and says that the loan she has and credit card balances are not at high rates (she has added to her original car loan to clear credit cards but then built up balances again.) She did cut up her cards a while ago but then requested new ones.
    I have suggested she looks at this site but I have to tread very carefully I don't want her to stop sharing stuff with me. I am going to try to persuade her to come with me to CAB.
  • Believe me, £12k debts is serious but it's not the end of the world. She's at that age where she's fully mature, but nonetheless still has a few years learning to do, so the whole thing will be a useful experience for her, hopefully she won't do it again, and maybe in the long-run she'll earn & keep more money.

    Interesting to hear what you say about the HSBC bank. I went into our Media Room and looked through the recent archive - I found The Daily Mail on Monday May 9th, headline "High Street Loan Sharks".

    [BANKS have been accused of 'binge lending' and abandoning vital checks which should protect customers from crushing levels of debt.]

    (By Sean Poulter)


    They're somewhat irresponsible to refuse £12k and say yes only to £15k - what planet do they come from? Flashes up in my mind the recent advert for one of the banks featuring the FAT MANAGER who is not interested in offering an account because the deposit was too small.

    I think your daughter should have a bash at requesting that between 25% and 50% of her debts are WRITTEN OFF. She should then pay the rest off.

    At £12K of debts, she can't afford avoid 100% repayments on her income, and NEITHER is that amount big enough (although it's getting close) to justify going bankrupt. So I'd advocate don't go bust, and arrange to make applications to have 50% of your daughter's debts excused.

    Send me a personal message if you'd like any further help (*NB I am now able to offer a minimum of a couple of hours a week to moneysavingexpert people in need of help IF my posts are felt to be welcome, helpful & accurate and above all IF this is wanted?) No charge.

    Re. GUARANTORS - (a) When looking at the possibility of becoming a guarantor, note that some but not all financial institutions will allow it as a factored score that will support finance applications. (b) The guarantor themselves are likely to need to have an immaculate credit score. (c) If guarantor arrangement is not officially available from the lending institution, the only way to go about it (and it's not TOO "Heath Robinson") is to become the Banker yourself, take out the loan in your name (if that's the appropriate action), and then accept a signed written undertaking from your daughter to pay you a feasible figure each month, one that is not too much for her to stand, and not too little that it starts to significantly drag on for both of you or incur a high accumulation of interest charges.
  • debtbuster2K5
    debtbuster2K5 Posts: 1,515 Forumite
    jane528 wrote:
    (she has added to her original car loan to clear credit cards but then built up balances again.)

    I think the above comment is the biggest reason not to go down the consolidation route.

    As you say It will enable her to live within her means, however it appears from reading your posts that your daughter has not fully accepted she has a problem and still has her head partially in the sand.

    Generally, when consolidating you believe that you have paid off your debts. Your credit card starts shouting that it is empty and within a short space of time you are back to where you were and then some.

    The best advice is for you or your daughter to do a budget (to the penny), post it up on here (If you want to) and we will look at areas where it could be cut back. Then look to get some better deals on the debts, eg 0% cards and begin to snowball.

    Use the snowball calculator here https://www.whatsthecost.com/snowball/aspx and you would be surprised at how quick the debt comes down.

    If you have any questions pm me or post again

    Regards
    24 hours in a day. 24 beers in a case ... coincidence? :beer:
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