https://www.qms.space/ News en-US hourly 1 http://wordpress.org/?v=3.5.1 Should You Help Your Child to Buy a Home? https://www.qms.space/blog/article/should-you-help-your-child-to-buy-a-home 23 September 2019, 4:18 pm The Bank of Mum and Dad became one of Australia's top 10 lenders last year, with more than half of young Aussies seeking financial help from their parents to buy their first home.

If you want to help...

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The Bank of Mum and Dad became one of Australia's top 10 lenders last year, with more than half of young Aussies seeking financial help from their parents to buy their first home.

If you want to help your kids take their first step on the property ladder, there are more ways to do it than just lending them money and hoping they'll get around to paying you back. Each of these options needs to be considered carefully before you commit, so you can decide which will be the best for you and your child.

Joint ownership

If you're worried your children won't be able to afford a home loan on their own, or you want to take a more active role, you could consider making a joint purchase of a property by using the equity in your home.

Joint ownership can be arranged as a 50/50 split (joint tenancy arrangement) or a customised tenants-in-common arrangement depending on how much you each want to pay.

The downside of joint ownership is that if one party fails to make their repayments, the other has to make up the difference to make sure the full monthly payment is covered. Shared responsibility could also be a recipe for arguments down the line.

Guarantor loan

If you want to provide financial security for your child, you could act as a guarantor. This doesn't simply mean agreeing to cover their mortgage payments if they get into financial difficulty, but also taking out another loan on your property that helps to secure theirs.

Advantages of a guarantor loan for young buyers are that they might not need to pay a deposit and could save hundreds or even thousands of dollars on interest in the long term.

The risk for guarantor parents is that you might find yourself having to cover their repayments, with the possibility of losing your own home if you're not able to.

Financing their deposit

If you prefer to avoid the risk of being responsible for your child's loan, and want to encourage independence, paying their deposit is still a generous alternative. Saving up for a 20% deposit is the biggest barrier many young people face to buying a home, so taking care of this in one fell swoop will give them a great headstart.

It's up to you to decide whether this is a loan – in which case you might want to draw up a binding loan agreement – or a gift.

Buying a property in your child's name

If you have the means to pay for their property yourself, and you wish to do so, there are several ways you can go about this. You can buy the property in your name and transfer ownership at a later date when they purchase it from you, you can buy it in your child's name, or you can buy it in their name through a trust.

While this will ease the burden on your child, they could be hit with a significant Capital Gains Tax payment in the future when they take ownership.

Do you need debt help?

If you're struggling with debt or you need advice about any important financial decision, call Debt Fix on 1300 332 834 to speak to one of our advisors today and get a free debt analysis with no obligation. The information in this article is general information only and should not be taken as constituting professional advice from Debt Fix Pty Ltd.

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What Are the Alternatives to Payday Loans? https://www.qms.space/blog/article/what-are-the-alternatives-to-payday-loans 16 September 2019, 4:16 pm With consumer debt continuing to rise, more Australians are relying on payday lenders as a quick fix when they need some extra cash. These lenders offer small amount loans to people who might be refus...

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With consumer debt continuing to rise, more Australians are relying on payday lenders as a quick fix when they need some extra cash. These lenders offer small amount loans to people who might be refused a traditional bank loan because of their circumstances.

Of course, like everything that sounds too good to be true, there is a catch. Payday loans have high interest rates, typically in the double digits, which means you could end up paying back considerably more than with another type of loan.

There can also be expensive penalties if you miss your repayment deadline, and taking out a payday loan could harm your applications for other lines of credit in the future.

What are payday loans?

'Payday' loans generally target low-income borrowers who need quick cash to tide them over until their next payday. The loan may be paid back on the day you get paid.

While payday loans are conventionally very short term loans (e.g. two weeks), some loans can last as long as two years. Loan amounts can vary from $100 to $5,000, depending on the lender.

Are payday loans bad?

Payday loans might seem like a convenient option, but compared to conventional loans, the interest rates can be extremely high – as much as 48% in some cases. This is the main reason why these lenders are seen as disreputable and preying on the most vulnerable people in society by contributing to their debt problems.

While high interest payments might be an acceptable loss if you just need quick cash for a dental treatment or other urgent expense, borrowers who rely on payday loans on a regular basis will be losing a significant amount to interest in the long term – to the tune of hundreds or even thousands of dollars.

Potentially more damaging than the high interest rate is the effects payday loans can have on your credit score. When you apply for a loan with another provider or a credit card, the lender will view your credit file and will see that you've used payday loans in the past. They could take this as an indication that you have trouble managing your finances and this could lead to your credit application being rejected.

Other options

If you need to borrow money fast to settle a bill or for other expenses, there could be more options than supporting the predatory payday lending industry. Depending on your personal circumstances and how much you need to borrow, these could include:

  • No-interest loans – small loans available from certain banks for low-income households to cover agreed services, such as medical care or training.
  • Centrelink advance payment – if you receive Centrelink benefits, you may be able to request a lump sum payment in advance. This will be repaid in instalments with interest.
  • Contacting your utility provider – if you're having trouble making your bill payments, you may be able to arrange a more affordable instalment plan with your utility company.
  • Non-conforming loan – if your loan application has been rejected by the big banks, you may still be eligible for a non-conforming loan from other lenders. These usually have higher interest than a conventional loan, but lower interest than payday loans and with higher loan amounts available.
  • Debt consolidation loan – if you're struggling to pay back multiple loans, credit cards or other payments, these could be combined into a single consolidation loan with a more affordable monthly payment, helping to make your finances more manageable.

To find out more about your borrowing options, call Debt Fix on 1300 332 834 to talk to our advisors and get a confidential, obligation-free debt analysis.

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