Helping Daughter With Debt

RE: Helping Daughter With Debt Post By Maggie (Guest Post) (05/29/2006) NO! NO! NO! NO! NO!!!!!! ARE YOU CRAZY? You would jeopardize your home (increase your mortgage debt) to bail out your irresponsible daughter? 1. How can you be sure she will pay you back regularly, especially when she has gotten herself into trouble already? 2. Lending to family should never be considered lending-- it should be considered a gift, because that's what it will be if they don't pay you back as scheduled (if at all). Makes for strained relationships and feelings of obligation--- NOT GOOD! 3. You're going to refinance at a rate that's LOWER than 5.75%? I'm assuming this is a fixed rate. What is the term of the loan? If 30 years (God, I hope not), you're willing to stretch it out that long? Go to www.bankrate.com and use the calculators to see what you're really getting into. 4. Your daughter dug this hole, she should climb her way out, whatever that takes. Sounds like some changed habits are in order. Bottom line, she needs to learn to live below her means. Bailing her out now will only teach her that it's okay to keep doing business as usual. My guess is that she will continue to run up more debt after you bail her out, because she will have not have changed her attitudes and behaviors that got her there in the first place. Yes, paying off debt is hard. But it's the right thing to do, and if she's smart, she'll swear off credit and deal with strictly cash. 4. Tax deduction, my eye.... why does everybody fall for that one? Paying more out each month (in the form of interest) and stretching out the loan is still paying more, whether it's tax-deductible or not. Refinancing should only be done WHEN THE TOTAL OF ALL PAYMENTS IS LESS WITH THE NEW LOAN. OTHERWISE IT IS COSTING YOU MORE!!!!!!! 5. You can talk to her all you want about how to manage her finances, but until you see her doing this ON HER OWN, I would not be putting your money on the line. 6. Scott writes "I suggest only using her credit for emergencies and budgeted spending." What emergencies? Nuclear disaster? Revolution? (See Jerold Mundis's book "How to Get Out of Debt, Stay Out of Debt, and Live Prosperously") Credit cards will never help you in a true emergency. People only THINK they have emergencies because they limit their thinking about how to solve problems. As my wise great-uncle (a CPA) used to say regarding credit, "You'll never have more money next month than you do this month." (meaning pay now for what you buy now, don't count on "later") Wish I'D listened more to this very sage advice. I know your intentions are good (she is lucky to have you for parents), but you are really just enabling her. She needs to work her way out of this. Debt is not cured with more (or different) debt any more than an alcoholic is cured by having another drink. I have a similar situation in my family (my younger sister), but realize I cannot help her by paying/lending her money (I was going to borrow on my credit card to help her-- oh, but it was such a low rate!). It would only get ME in trouble by increasing MY debt (and I was not confident of her ability to pay me back-- that's why she was in such trouble), and she would learn nothing and change little about her behavior because she did not have to struggle through it on her own. www.cheapskatemonthly.com --- read Mary Hunt's story and use the resources there www.debtorsanonymous.org --- may seem severe, but there is some good thinking/advice shared there that WE ALL can use! Good luck to you---- Maggie RE: Helping Daughter With Debt Post By Sally (Guest Post) (09/02/2005) Please forgive my bluntness, but don't do this!! Bailing her out will only teach her to do it again. Let her pay it off until it hurts. That is the only way she will learn. Parents who bail out their children do them no favors. I mean no disrespect. I know you are wonderful parents who are trying to help her every way you can. It's tough to see our kids make mistakes, but the biggest mistake would be bailing her out. Here's a word of warning. We know someone whose parents bailed him out. He is now in debt totaling over ONE MILLION DOLLARS!!! How is he going to pay that off now that his father is gone and mother won't be around much longer? Instead, look into Debtor's Anonymous. It's the kindest thing you can do for your child. http://www.debtorsanonymous.org You are great parents to want to make such a sacrifice for your child. She is lucky to have you. RE: Helping Daughter With Debt Post By shirley Wilson (Guest Post) (01/25/2005) I am from Scotland in UK and I would have to say I would not help daughter in the way that you are contemplating. at 31 she is really old enough to know that this is a totally irresponsible way to beahve and it does not show her in a good light if she allows mom and dad to give themselves such worry over repayment and never, never would I risk losing my home to help out an irresponsible person. Perhaps she could move back with you for say a year to repay her debt. Help in that sort of way as much as possible or perhaps she could do that plus get a part time job and the two combined would surely allow the debt to be repaid or substantially reduced sooner. You could also perhaps if you can afford it, pay an extra small amount each month to reduce the interest and this too would show support. But I really would have to say she should be thinking of things to help herself and you should simply be there to show support and not let her become homeless or jobless etc. BUT DO NOT PAY THE MONEY FOR HER!! Hope this helps. Helping Daughter With Debt Post By syd (Guest Post) (08/20/2004) I believe in the tough love approach ... I have seen so many people that bail out family members which does more harm than good in the long run. They get to expect that when they have a problem someone will bail them out! They spend wildly while you save your money ... only to bail them out ... I don't think this is healthy. I personally would not refinance my home to bail out a person that has been irresponsible in running up big time debt. There is a lesson that can be learned. What if you refinance your home and she does not pay you? Just something to think about. If there has been serious medical problems, unexpected loss of job, etc. which cannot be controlled, then maybe I would offer some assistance. It is a case by case situation. I would try to assist her in getting debt counseling and have a plan, and not use any credit cards while trying to get out of debt. Don't just have her pay the stated monthly payment, pay much more. Sometimes a part-time job could speed up repayment. Perhaps the credit card company can work with you, though I doubt it. RE: Helping Daughter With Debt Post by Gypsyducks (2) | (08/20/2004) Contact Call the credit card companies and ask them if you have the money right now if they could settle for a lesser amount. Many companies would rather get some then none. Be careful of debt consolidators. Companies that lump your cards together, negotiate low or no interest. Then you pay a monthly amount to get the debt down. The problem is that this looks very bad on your credit report. Hopefully this will teach her about finances! RE: Helping Daughter With Debt Post By Linda (Guest Post) (08/19/2004) I suggest that your daughter, who is far from being a child, cut up all of her credit cards until this is all paid back. Also a legal, signed promissory note for the debt she will incur to you, with the terms of the payback, will make this legal and more likely to be important enough in her eyes to abide by. Also, insist that she attend a class on how to use credit wisely. Adult ed, community colleges, consumer credit couselors all offer these.