Helping someone in financial trouble

martyp

Hi all,
I'm trying to find a way of helping someone with nearly £8k on credit cards with approx 30% interest and very much paying off the interest all the time which is £300 or so a month.
My own personal credit rating is good and I am eligible for good cards and loans but I don't want to jeopardise my own situation and helping someone as a guarantor etc. I appreciate is risky. I was personally in the same boat with that amount of debt and a family member saved me as such and have desperately tried to avoid going down that hole again for many years.
I want to help them somehow but just not jeopardise my personal credit and considered how there could be issues if they have trouble keeping up payments.
Ultimately an £8k loan on say 6% would only be about £150 a month. They have a relatively decent income with minimal outgoings otherwise. They just can't seem to get a card or loan with low interest.
Any ideas?

MorningcoffeeIV

Help them by directing them here.

Don't get loans for them unless you can afford to give them the money. 

martyp

Thanks, yes definitely would be good for them to talk to others going through similar experiences. I know I'm lucky and many don't have a good lifeline to escape from debt and it's a horrible place to be so want to help them if I can.
There's probably some reason for it but frustrating that those in the worse financial situation are penalised with the highest interest rates and those in good financial standing benefit from the low or 0% interest rates.

MorningcoffeeIV

martyp said:

There's probably some reason for it but frustrating that those in the worse financial situation are penalised with the highest interest rates and those in good financial standing benefit from the low or 0% interest rates.

It's the only way to can be. The higher the risk, the higher the cost needs to be.

It would be mad to charge low risk customers higher prices than those who will are more likely not to repay.

Rob5342

It's natural to want to help people but definitely don't get involved lending them money or becoming a guarantor. I think that's just affirming your feelings.

As mentioned get them to come on here, there will be a way that they get themselves out of debt. Some options will involve their credit record being harmed but that may be the only way out

Rob5342

Seemartyp said:

There's probably some reason for it but frustrating that those in the worse financial situation are penalised with the highest interest rates and those in good financial standing benefit from the low or 0% interest rates.

It's the same with anything involving risk - insurance etc. The less likely it is that you'll get your money back, the more you have to charge to make a profit.

martyp

Thanks all, much appreciated.

Sea_Shell

I've offered to help family in the past, by looking at their Statement of Affairs (income v outgoings) and trying to help them budget.

They didn't want to do that, so I can only presume that they didn't want me to see how they much they actually had available and how it was being spent.   Personally, I think they earn "enough", but wouldn't want to make the tough choices needed.

So, if they won't engage with the process of getting to the bottom of the debt, then I'm definitely not going to engage my wallet.

stu12345_2

Sea_Shell said:

I've offered to help family in the past, by looking at their Statement of Affairs (income v outgoings) and trying to help them budget.

They didn't want to do that, so I can only presume that they didn't want me to see how they much they actually had available and how it was being spent.   Personally, I think they earn "enough", but wouldn't want to make the tough choices needed.

So, if they won't engage with the process of getting to the bottom of the debt, then I'm definitely not going to engage my wallet.

I had similar problems .my mother offered to help me.her question was you and your wife work .you have no kids.how can you be in debt.and struggling.
however trying to tactfully explain we are both paying off car repayments .loans we took to do up the flat quickly etc and that is mostly why we are skint 
my mother gave the reply .your father and I had  old rust bucket cars for years,we were never in debt or behind.we went with old carpets and couches for years.
I didn't want to explain exactly how much the cars cost us as she would probably faint.
hence I went to a dmp with debt charity who never poked into how we got into a mess.

however about 17 yes ago I entered an iva.due to income being halved when I got seperatated.the iva solicitors that presented my iva forms had to put down reasons for being skint and unable to meet payments. I felt that was unnecessary.

EssexHebridean

The single best thing you can offer someone in debt, to not only help them claw their way out of debt now, but to stay out of debt in the future, is advice. (Assuming that you have the knowledge to offer that advice of course). 

The single worst thing you can do for someone in debt is to offer to pay things for them - because if you do that it:
a) Takes all the control of their situation away from them
b) removes the incentive to do the legwork - putting together a budget, learning to live with that budget, learning what the mistakes they have made to get themselves in the situation they are (if applicable)
c) Deprives them of the learning curve that will act as a preventative measure to debt reoccurring in the future
d) Actually makes it more likely that they will accrue debt again going forwards

When I was 18 - back in the days when your 18th birthday was the sign for ALLLL the banks to send you credit card applications - I got  myself into quite the hole with a CC and overdraft. By today's standards, we'd view it as an almost insignificant amount of debt - but at the time that several thousand pounds felt like a big old sum to someone of my age. Eventually I got the nerve to tell my Mum and Dad - who said "OK - we're not bailing you out, but we will sit down with you, go through your income and outgoings, and help you make a plan to pay it off" - at the time it felt brutally unfair - all my pals who were getting into similar situations were seeing the bank of M&D step in to the rescue...but now, I'm forever grateful that they did that, as I have never wracked up CC debt, or an unmanageable OD, again. 

As already said - point them here. Suggest they do the work in advance by putting together their SOA - the link to one of the calculators we recommend is in my signature below. Offer to help them with that if you feel confident to do so. Make sure that if meeting up, you suggest free or at the least extremely cheap options - don't contribute to making their position worse by keeping up expectations of expensive nights out or shopping trips.  Point them to the (free) MSE Credit Club too - to see if there might be any possibility of getting any of the cards onto 0% balance transfers - a good way of meaning that they can clear more, faster. 

I'd also suggest not encouraging them to get a loan to clear the cards - I know as the interest rate might be lower it seems counterintuitive to advise against it, but this is consolidation, and consolidation rarely works. I suspect there may be more going on here than meets the eye too - someone on a good income with "just" £8k of debt wouldn't usually be seeing 30% interest rates or indeed struggling to get credit... 

stu12345_2

did you know Warren buffett the world's 4th richest man refused to give a loan to his daughter years ago .he was a billionaire by then.
but he did say if she took a job that would make a difference to society and the wellbeing of folk.he would triple what her employer paid her.
an interesting story I thought.

another story is sting the singer from the group the police is leaving none of his wealth to his kids.he is making sure they understand what making it on your on effort means.