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Original poster

Bad credit/mother taking loan for my debt consolidation

24 replies

Penelope78 · 03/01/2021 14:47

I have an extremely poor credit rating and have done for many years. I have one credit card with an interest rate of 44% which got me into an even bigger mess which is now on a payment plan as well as another one of 37%. I’ve gone through the figures and I won’t be able to pay these off by the time the plans end. The next step is to accept a default which stays on my file for six years, from both cards. However, my mother, who has an excellent rating has very kindly offered to take out a loan to cover my debts. We have worked out what I can afford to pay her back monthly and as my job is secure and she trusts me we know this won’t be a problem.

However, this is my question, if any one can help. Is she allowed to take out an amount of money and then directly transfer that to my account? (Which I will then use to pay my cards). If memory serves me correctly when applying for loans they usually ask for what the money is intended, such as a new car or home improvements. I don’t think there is an option for consolidating relatives debt. Is there anything legally we are missing? Can she freely do this? Thanks for any advice.

OP posts:
JustFrustrated · 03/01/2021 15:14

Yes she can. The loan company don't check what she's spent the money on. That question is to ensure you're using the right loan, e.g. not using a personal loan when you should be using a business loan.

RandomMess · 03/01/2021 15:20

Your Mum could take out a 0 % credit card and pay off your cards with that if that's cheaper than the loan. Again they don't carr/check.

Plump82 · 03/01/2021 15:27

Usually theres an option for gift. Home improvement loans, car loans etc can sometimes have maximum terms and amounts depending on the lender

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Plump82 · 03/01/2021 15:28

@RandomMess

Your Mum could take out a 0 % credit card and pay off your cards with that if that's cheaper than the loan. Again they don't carr/check.
But this is a better idea.
Original poster
Penelope78 · 03/01/2021 16:25

Thank you very much for the replies. I will mention the credit card option to her. The only thing with that is I think 0% wouldn’t be for long enough, would it? Currently we are looking at repayment over five years. She hasn’t applied yet but the loan says “from 2%” so we are hoping as she has a top score this will be what’s actually offered when she applies.

OP posts:
RandomMess · 03/01/2021 16:30

Read up on money saving expert.

Sure 2% would be a good deal but shifting via 0% credit cards means you may be able to shift it sooner.

It's to do with when and how the interest is applied.

Winewednesday · 03/01/2021 16:38

Hi OP, that is very good of you mother to offer you help. I would suggest using a 0%card it may only be for 24 months but then she could transfer the balance over to another card for 0% at the end of the term. It is a bit faffy but you will save paying any additional interest. A credit card it definitely worth a go first.

RedskyAtnight · 03/01/2021 16:49

It's great that your mum trusts you to pay back the loan. However, have you looked at the reason why you got into debt? Unless it was a one off scenario (you had to have 6 months off work due to ill health, for example), are you 100% sure you won't just get yourself into more debt?

partyatthepalace · 03/01/2021 16:54

She can do what she likes.

It's great she's helping you - but you really really really (!) need to look at why you have got into debt. Otherwise all that will happen is that you pay her back while taking on more debt elsewhere, and apart from creating an even bigger financial pickle, that will probably impact on your relationship with your mum.

There are some good books and sites around so please do some research, put together a finance plan, and talk your issues through with someone if necessary. Nothing to be ashamed of, but nip it properly now.

Doodlebug5 · 03/01/2021 16:55

I would look at the balance transfer on 0%credit card then just keep transferring to 0% till paid. It also depends how much the balance is. With good credit rating your mum is likely to be approved for £1-2k balance straight away. To get to the £5-10k credit limit you need to show spending and payments easily

Original poster
Penelope78 · 03/01/2021 17:02

Thanks again! Yes, I’m extremely lucky with the situation! What we are not sure about with the credit card is can we pay a card in someone else’s name? My mum says she doesn’t think so. She thinks it needs to have a cash transfer option. And as the longest amount of time the credit card would be available is 24 months and that would mean I couldn’t afford the repayments.

OP posts:
RandomMess · 03/01/2021 17:09

I've paid DH card off (different names) as a balance transfer it literally just asks for the card number!

Before the end of the 24 months you transfer it again to a new card.

There are calculators which will show you how much you will owe at the end of 24 months and the the likely transfer fee and will show you how quickly you can pay it off versus the 5 year loan. Also how much interest you would pay.

Or you could consider splitting the debt in 2?

You do need to have addressed why you got into debt in the first place though.

NeverDropYourMoonCup · 03/01/2021 17:16

With your previous history, with the greatest kindness in what I'm saying, she needs to chose something that suits her and to make the payments directly from her bank account, you making payments directly to her by standing order.

That way, you won't have any accidental non payments affecting her. As it is, she has to consider that, on previous experience, there is the possibility that you won't pay her back in full - the reason why you are wanting her help in the first place, after all - and only take on what she can afford to lose.

She can put down whatever she likes for the loan, as they don't check afterwards. But to trust that she won't suddenly get hit by fees, penalties or debt recovery action because you've had an issue is a risk I don't think she should take - at least if it goes into her account, she'll see you haven't made a payment straight away.

And don't forget that this means you can't afford other credit - don't use it as a reasoning for taking out more as it won't affect your rating/her taking on your debt means your rating improved.

Honestly, if this were your mother posting, I'd advise against it. But if she was still sure she wanted to do it, that is what I'd suggest to her.

Original poster
Penelope78 · 03/01/2021 17:16

Thanks to all for replies. Of course the reason how I got into the situation in the first place has been looked at and talked about at length! I’ve had this debt for many, many years. I know how it happened and am 100% certain it won’t happen again. I knew this would be mentioned and rightly so, but yes my situation and mindset is far from what it was years ago. Our main concern now is she wouldn’t be breaking any rules to get the loan and transfer the lot into my bank account.

OP posts:
Original poster
Penelope78 · 03/01/2021 17:29

Thank you for the info @RandomMess

OP posts:
Kissmycousinkate · 03/01/2021 17:35

2% would probably for over £7500 so I'd definitely go for longest 0%credit card and then once that run out move to the next 0% deal. If you were to go ahead with the loan they do care what it's for, you would not be able to take a loan for someone else's debt if you were paying in a branch, it's not checked but most in branch appointments are recorded and that would be a big no.

greendress789 · 03/01/2021 18:19

But extreme but my friend ended up doing this for his dad and then his dad passed away leaving him with the debt! Just a warning...

ForTheLoveOfCatFood · 03/01/2021 18:43

Debt is not transferable when someone passes away (unless joint names) so not sure how that happened.

Plump82 · 03/01/2021 18:59

@ForTheLoveOfCatFood

Debt is not transferable when someone passes away (unless joint names) so not sure how that happened.
The friend will now have to pay the debt because the dad is no longer around to pay it back. So not transferable but still a debt that needs to be paid.
Crinkle77 · 03/01/2021 19:22

@ForTheLoveOfCatFood

Debt is not transferable when someone passes away (unless joint names) so not sure how that happened.
Sounds like the son got a 0% credit card in his name and shifted his dad's debt on to those cards and the dad was paying him back. When his dad died the son would be liable as the credit card was in his name.
Crinkle77 · 03/01/2021 19:26

@Penelope78

Thanks again! Yes, I’m extremely lucky with the situation! What we are not sure about with the credit card is can we pay a card in someone else’s name? My mum says she doesn’t think so. She thinks it needs to have a cash transfer option. And as the longest amount of time the credit card would be available is 24 months and that would mean I couldn’t afford the repayments.
Not all credit cards will allow you to pay off someone else's debt so you need to check. The CC are tightening up on their lending so the rules may have changed.
BlueThistles · 03/01/2021 19:58

@RedskyAtnight

It's great that your mum trusts you to pay back the loan. However, have you looked at the reason why you got into debt? Unless it was a one off scenario (you had to have 6 months off work due to ill health, for example), are you 100% sure you won't just get yourself into more debt?

I agree... what difference does the repayments make to you OP? you weren't paying your creditors .. why would you pay your Mum.. ? if you don't pay your Mum you will forever change your relationship.. and destroy her credit rating ...

will you PAY 🌺

NeverDropYourMoonCup · 03/01/2021 20:57

@Penelope78

Thanks to all for replies. Of course the reason how I got into the situation in the first place has been looked at and talked about at length! I’ve had this debt for many, many years. I know how it happened and am 100% certain it won’t happen again. I knew this would be mentioned and rightly so, but yes my situation and mindset is far from what it was years ago. Our main concern now is she wouldn’t be breaking any rules to get the loan and transfer the lot into my bank account.
I'd suggest that she makes the payments clearing the balances herself, rather than transferring it, which could be seen as a cash gift liable for tax or as deprivation of capital if she were to die in the next few years or need care.
Original poster
Penelope78 · 03/01/2021 21:38

Thank you @NeverDropYourMoonCup this is the type of situation I’m worried about. So she can get the loan, call up my card company and simply pay the balance due? Of course, everything else has been discussed, she knows I can and will pay. Thanks again to all.

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