Borrow money for family to spend and repay

My 60 yr old dad bought his apartment in QLD outright for about $250k about a year ago. Several months ago he had $30k in his bank account, excluding super which he can't access until 65/67, and had credit card debt of $10k. I don't know what the figures are currently.

His passion is buying options on the DJO based on W. D. Gann analysis, which I believe to be mostly nonsensical. I don't believe he profits from it, but he loves the study and it is his greatest source of enjoyment.

He either can't or doesn't want to work. I'm not really sure which it is. He does have medical issues that leave him feeling flat. The govt has denied him a disability pension.

He has asked me to help him borrow money to trade and to travel. We have talked with a broker who suggests to transfer atleast 20% of his property in to my name so that I can use it as security to borrow money for him. He would supposedly make the repayments from his income - trading options.

The broker has advised there is no risk to me as my dad is putting up the security, so if he defaults on the payments than it's his asset that is forfeited. I don't want to consider the property in terms of an inheritance to me.

I'm looking for advice as to what to do and consider. I want to support him, but I'm not sure what I'd be getting myself in to, if I adopted the option so far discussed. Is there another way, or would this way be recommendable?

Thanks so much in advance for sharing your opinions.

 

Silly broker providing advice like that - get proper legal advice.

If you want to support him you could lend him money, at your risk, and take a mortgage over his property to secure your loan and protect yourself.

 

What could possibly go wrong here?

Are you sure you're not his dad? The roles sound reversed.

 

Never heard of super you cant touch until 65/67

 

So why doesn't the broker lend him the money then if he thinks it is such a good idea ? As he is probably the one who will benefit from it anyway.

 

Why would you have $30k cash and $10k credit card debt? Makes absolutely no sense to me!

 

The risk to you is that your Dad defaulting will leave a nasty stain on your credit report as you're a co-borrower, and possibly going as far as bankruptcy if the bank can't recover their money if your Dad defaults. Overall I'd rate this proposition as incredibly risky with extreme consequences.

 

A pensioner borrowing money to trade options - and he makes no profit from this currently. Did I get that right, or have I misread?

Assuming that's correct, I highly doubt any bank would lend you money on that basis. Even if you were on the title, you'd need to have a benefit to the cash out - and realistically all you'd get is a non-working Dad who can't pay his loan.

 

And Dad paid cash for his property. Why cant Dad get a margin lending account ?

 

Aged 60 and no longer working?
Should be able to access super.
But maybe not a good idea - sounds like what he is doing with his money is akin to gambling.
First step should be to pay off that credit card from the cash in the bank.
Marg

 

If he is "gambling" (via this method of "investing") he might be better off thinking he can't access his super.

 

Believe it or not I had a client approach me like this. Had had similar - $30k cash and $15k credit card debt. He didn't want to pay off the credit card because then he would not have had the deposit. I couldn't help him, and sent him away. He came back a year later and he still had the $15k credit card debt, but some more cash. I didn't help him.

 

They often seek financial advice. Why?

 

Sounds like a recipe for a gambler involving his child in a disaster type situation.

I wouldn't go anywhere near it, dad or not.

 

I suggest you do not do this.

Your dad has 20k net to trade options. If he is great at it the value of that will increase quickly.

The transfer of the property into your name will affect the ability of your dad to sell the home tax free later on. It will also affect your ability to borrow money as well.

Use an excuse to get yourself out of a mess and limit the options for your Dad.

This is a difficult position for you.

 

Thanks all for the advice, really appreciate it.

He now advises he doens't intend to trade with the capital. Just to use it on paying cc debt and visiting home abroad one last time. The rest would be for a medical emergency. He would make the payments with newstart allowance.

I guess I don't really have a choice. If he can't pay, than I'll just have to do it for him. And my borrowing capacity will go down too Is it just that sometimes life sux but you have to get on with it?

 

So he pays down the cc debt, then racks it back up trading/gambling again.

If he wants to travel aboard I suggest if you're able to assist with this direct, pay for flights etc. And also discussing having funds put aside for medical.

You completely have a choice and ignoring the options and putting your dad and yourself in a worse position is not a good way to go about it.

 

If my dad is the guarantor of the loan, does that protect me?

 

Strongly agree. Putting aside the debate on whether or not there is/should be a need for security, I think what the broker has suggested is downright silly and there are much simpler ways of documenting the loan and securing your interest. I assume all of.is would tell banks to get stuffed if they demanded transfer of part of our properties in order to.secure their debt, I'm not sure what drugs the broker is on here