Should Father Open Line of Credit To Help Son?

photo by yushimoto_02 [christian

Q: I am single, 25 and have $26,000 of debt.  I was making some progress on getting this paid down, and had never been late on a payment when my credit card companies hiked their rates.  Now I struggle just to make minimum payments.  My father offered to open a line of credit in his name to pay off my debts with the understanding that I will pay off the line of credit.  I like this option because it will allow me to be debt free and, with the lower interest rates, once again start making progress on getting the line of credit paid off.  Should I take him up on this offer?

A: Your father is offering to borrow the money he is going to loan you.  This is generous of him, but nevertheless a short sighted solution, for several reasons.

Be True To Yourself

You stated that this plan would make you debt free.  Not true!  You have simply moved the debt, which could jeopardize your relationship with your father because if you were to hiccup on your payments, you would be damaging his credit rating.   But even worse would be the ensuing tension and awkwardness that would surely creep into the relationship.   Don’t think this can’t happen to you; it does happen to well meaning families every day.

Take Care of It

You need to take care of your own debt.  First, contact and confront the credit card companies who have raised their rates.  Remind them that you are a good customer and that you will take your business elsewhere if they don’t drop your rates back down.

Make a Plan

You need a written plan to get this debt gone in two years or less.  Cut all non essentials from your budget and take on a second and maybe a third job.  Use all of your cash flow and all of your second job money toward the debt.

In two years, you will be 27, debt free and liberated from that bondage.  Don’t ever go back.

Securities offered through LPL Financial, Member FINRA/SIPC