Helping someone in financial trouble

Rob5342

EssexHebridean said:

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

This is very true, I got into debt and borrowed some money from family to pay some of it off. They were very well meaning and I very much appreciated it, however for me it was a quick fix and as I suddenly had more spare money I ended up spending more. It did help a little bit, but I still had the same bad habits and I was still on the same downward spiral with the debts that were left. It was only when I started a DMP that things turned around. That made me look hard at creating a budget and sticking to it. I've now paid a few of them off through several years of hard work so it feels like an achievement, and I'm now in the habit of sticking to my budget all the time. It's harmed my credit record but I think that's good as it acts as a motivator that I absolutely have to stick to my budget, and when it finally clears it will feel like a hard earned achievement.

Exodi

I'm of a similar view to @EssexHebridean, just paying off someones debt is counter-productive in the long term.

Very often we see people wishing to solve the problem by re-arranging the deckchairs on the Titanic (moving the debt around), rather than addressing the underlying problem, that the ship is taking in water (they are spending more than they are earning).

It reminds me of 'my 600lb life' where morbidly obese people come to a clinic asking for weight loss surgery - these people will always express how they are absolutely desperate to lose the weight and would do anything, yet when told they would need to prove they can change their eating habits by going on a diet before being approved for surgery, it's extremely common that they are unwilling to change their eating habits.

People are often willing to do 'everything'... except anything that actually affects them, as may be the case for the OP's friend.

The problem is by just magic-ing away their debt (or their weight in the 'my 600lb life example'), you haven't actually addressed the fundamental problem... the reason they got into debt (put on weight) in the first place. If someone doesn't change their habits, e.g. that they spend (or eat) too much, then it's inevitable that once their debt (weight) is magic-ed away, they will end up in the exact same scenario. In fact they may end up in the same scenario even quicker than before, as they are no longer be worried about their previous negative situation.

It's the whole reason this forum has a dim view on consolidation loans, despite them making financial sense.

I think I overdid the analogies. In summary: don't pay off their debt, it will not help them.

DullGreyGuy

martyp said:

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.

Guarantor loans are ridiculous, you are committing to pay a 40% or more APR if the other person doesn't pay on time. Never understood why you'd do that -v- getting a regular loan (or using own funds if you have them) and have the person pay you... that way you get the 6% interest, the person is less likely to default on the lower payments and if they do then you takeover paying a lower payment. 

I agree with everyone else comments... only do it if you are willing to never see any of the money again. If you don't want to do that or cannot afford to do that then don't lend them the money. Similarly, depending on how the debt occurred simply paying it off for them may worsen the long term outcome rather than improve it. 

twopenny

I've known 2 people who got into a lot of debt. Took time but eventually they went to our local Citizens Advice which specifically deals with debt management.

Not only did they get control of their debt, in one case paid it off while on a low income, but the pride and happiness they got was evident. They even looked better. And that one case he got it all paid off and gained in self esteem to get a better job.

It's tough. Not everyone can do it but it's worth a try.

I was given a tip early in life when I asked family for more money while at college because my mates were buying tea and toast and I could only afford tea. Before anything else I was told to keep a record of everything I spent  for 2 weeks. I was mortified but I had to do it.

Not only then when I could see where the money went but I've used the technique since. It really does show the number of 'must have nows' that don't cost much can add up to an amount that makes a difference.