Money Moral Dilemma: Should I tell my son I've discovered he's in debt?

MSE_Kelvin

This week's MoneySaver who wants advice asks...

My son and his girlfriend are both in full-time employment, but live with me and pay minimal rent so they can save for a deposit on a home. His girlfriend started getting letters from a debt collection agency, and then my son left out a letter from a loans firm saying he owed £2,000 - I couldn't help but read it. I'm not sure which one took out the loan, but it looks like the other has signed as guarantor, and I'm worried about the effect this will have on their ability to get a mortgage. Should I tell my son I know he's in debt so I can help, or leave them to deal with it alone?

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gettingtheresometime

I don't usually answer MMD but, on the off-chance the Moneysaver is reading, it's obvious that there's something seriously amiss if, even paying you nominal rent on the basis that they can save for a deposit, they're defaulting on loans.
Not sure it would be fair to ask your son about the letter on his own - personally I'd be tempted to ask both of them - together.

Jude57

I agree entirely with @gettingtheresometime that this really needs to be discussed with both your son and his girlfriend. I'd also warn against bailing them out, mainly because it could mean all they learn from this situation is that you'll bail them out again in future. Have a look at the Debtfreewannabe board here - and try to get the young couple to do the same. If they recognise that they have problem debt then point them towards the debt advice charities recommended by MSE - StepChange, CAB, National Debtline, Tec - being careful to ensure not to use any similarly named fee-charging companies.

It's likely this loan isn't the only debt they have so it's important to deal with everything as a whole. It's also unfortunately likely that their house purchase plans may need to be postponed as mortgage lenders will look at credit utilisation when making their lending decisions.

Marvel1

Leave them to deal with it.

Mojisola

MSE_Kelvin said:

My son and his girlfriend are both in full-time employment, but live with me and pay minimal rent so they can save for a deposit on a home. His girlfriend started getting letters from a debt collection agency, and then my son left out a letter from a loans firm saying he owed £2,000 - I couldn't help but read it. I'm not sure which one took out the loan, but it looks like the other has signed as guarantor, and I'm worried about the effect this will have on their ability to get a mortgage. Should I tell my son I know he's in debt so I can help, or leave them to deal with it alone?

You're subsidising their living expenses so that they can save for a deposit - instead, they have got themselves into debt.

What's happening to their money?

They obviously haven't been very careful about keeping their debts secret - perhaps your son wanted you to find out and so left the letter out?

Suggest a family meeting and offer help (as suggested by Jude - not money!).

HampshireH

I'd speak to both and ask where the money that you are saving them each month is going. Especially if the agreement is that the rent is cheap specifically so they save for a deposit.

Make it clear that your hospitality is just that and not something which will last for ever. Then offer support if issues are disclosed 

Don't bail them out or offer any more financial support. Two people working full-time need to respect the privileged situation they are in to be able to pay minimal rent and take ownership of any financial problems. They won't learn otherwise

MDE

Assuming they are registered at your address (which they must be to receive the letters there), your financial/ credit accounts are linked with theirs.
Therefore it's in your interest as their defaults could reflect badly on you.

Carrot007

MDE said:

Assuming they are registered at your address (which they must be to receive the letters there), your financial/ credit accounts are linked with theirs.
Therefore it's in your interest as their defaults could reflect badly on you.

That's not how it works.

Credit is not linked on reports by address.

Now yes any individual company is free to blacklist a property forever for any reason and could.

Only having a joint account of some kind links credit records. (getting married does not even do it).

MDE

Carrot007 said:

MDE said:

Assuming they are registered at your address (which they must be to receive the letters there), your financial/ credit accounts are linked with theirs.
Therefore it's in your interest as their defaults could reflect badly on you.

That's not how it works.

Credit is not linked on reports by address.

Now yes any individual company is free to blacklist a property forever for any reason and could.

Only having a joint account of some kind links credit records. (getting married does not even do it).

They're family members living at the same address. There will be some sort of link.

Even if there's nothing formal, the lady with the original query will be implicated pretty quickly once the bailiffs start knocking on the door and asking for proof of ownership of goods to prevent removal in order to service the debt.

penguinwaddles

Well I’d be seriously narked off, they are supposed to be taking advantage of nominal rent and saving a deposit yet instead accruing debts. I’d ask them to explain and also advise rent is increasing....I’d select a figure that they should be saving in addition to any nominal fee you are charging... open an ISA and put the savings amount away for them each month..they can have it when they move out.
Encourage them to each write out a budget and plan to pay off any debts as part of their budget

tobiasjug

A bit too trusting (and naive) I'm afraid

It would have been better if you were charging the full rate, whatever that is - and then saving the discount yourself as part the money needed for the mortgage. 

If it all falls through, you still have the money. As it stands you have no guarantee they have been saving that discount, or they won't spend it. Your son could split with his girlfriend and all that would have happened is that she has had cheaper accommodation.

If you want to be the 'Bank of Mum and Dad' then the best way is to act like a bank. Harsh, I know, but I have seen too many fall outs in families over money.