Sorting out Parents debts

[DaBaron]

Hi I have a refinancing question that I’m hoping someone may had similar experience with or may know how to go about taking the first steps.

In brief I’m trying to help sort out my parents debts. They’re both now retired and receive the state pension. They do not have a private pension nor do they have any other type of income. What they receive is enough to get by month to month with not much left over to finance their debts. My brother, two sisters and I have decided to help them out.

This is the run down of what they owe
1. Two credit union loans in my fathers name for a total of €21,000
2. Two credit union loans in my mothers name for a total of €18,000
Both the above totals constitute a small loan in the region of €2-5000 and a larger one of around €16,000 give or take.
3. Bank of Ireland loan of €22,500
4. AIB Loan of €12,500

Asset wise - my parents own their house but the deeds are with one of the banks as
on one of the loans.

Its quite a long story of how they have arrived at this point, but suffice to say we as siblings would like refinance the debts into one larger one with a longer payment period that we could all contribute a certain amount per month. So far the credit union have helped somewhat and agreed to lessen payments to small degree but not by much, they seem sticky as to the term of the loans which seems limited to 5 years.

To me the most obvious way forward would be to approach one or the other bank, but the impression I get, to put it mildly is that they may not look all that favourably on applicants looking to consolidate debts with other lending institutions.
Does anyone have any ideas on how to go from here, regarding refinancing or the best way of approaching the banks?

Any advice would be warmly received

 

[wbbs]

Can't help with the refinancing issue but if you and your siblings are all working then you should look into doing 'deed of covenant' to your parents as a very tax effective way of giving them money which you are going to be doing anyway.

 

[chlipps]

One thing to watch for down the line is that you dont get caught for inheritance taxes or other... if you pay all that money, you will almost own the properties.. One clean way would be for one of the siblings to take over the property and get a mortgage and pay it off. Its theres then at the end and avoid the agro of multiple people owning the property..

 

[Bronte]

Do they not have shares in the credit union. Also what exactly is their income, what are their outgoings, how much is the repayments, what are the terms of the loans and the interest rates?

A consolidated loan is what you are looking for and it's unlikely any bank will give this. But maybe they would if someone went guarantor. But this is a lot of debt (about 70K)

There used to be a product (insurance type policy) for retired people who had equity in their homes, like they sell the house to the bank, they keep the house and when they die the bank gets it's money. But one would need to be very careful with these.

Other option is for someone to take on the full 70K debt, get a loan from their bank and everybody pay it back. But that's messy, can lead to siblings fighting, and tricky issues if one of the parent's dies, gets ill etc. Also not advisable for someone to take on anothers debts when there is no guaranee of getting repaid.

Next option is Mabs, see if they can get the debt rescheduled so there is doable repayments.

Talking to the banks and credit unions to see what the options are.

Also the four of you could tackle the debt with the highest interest rate first. Pay that one first. Also the issue of why there are these debts has to be discussed, if it's the case that helping with the debt means your parents will apply for more credit, well then it's pointless helping them.