How to Help a Family Member Who's in Debt

When your loved ones are in debt, it can be hard to watch them struggle. Here are some tips on how you can help.

When your family members are in financial trouble, it can be very hard to see them struggle. While you want to help, it can be difficult to decide how far you should go with offering advice. And whatever you do, it's essential to make sure your own financial security doesn't end up affected by your efforts to provide assistance.

Fortunately, there are some steps you can take to try to come to the aid of a loved one who is struggling with debt. Of course, your ability to intervene will depend on how receptive your loved ones are -- so you'll need to carefully consider your relationship with the person who is in debt to decide what kind of assistance you're able to offer.

Be very cautious about cosigning a loan or lending money

Often family members who are in debt will want direct financial help. If someone you love comes to you and asks you to loan them money or to cosign a personal loan or credit card application for them, this is a situation where you need to tread very carefully.

It can be tempting to say yes, especially if the person struggling is someone you're close to. But consider how your relationship will be affected if your loved one doesn't pay back the money they borrow or defaults on the loan you cosigned for. Your credit score could be destroyed by a default, the creditor could try to collect from you, or you could be out the money you've leant and stuck in a situation where your own financial security is affected.

If you cannot afford to lose the money you loan to a loved one or to pay back a cosigned loan, you generally should say no to a request to borrow or guarantee a loan. If you do decide to move forward, make sure you:

• Ask how the borrower plans to pay back the loan
• Have a written agreement in place detailing when and how payments will be made
• Agree up front whether you'll charge interest on a loan or not

While it may seem harsh to say no to a request for this type of help, you won't do yourself or your loved ones any favors by putting your future relationship at risk or by jeopardizing your own financial stability.

Consider giving non-cash financial assistance

If you have a family member who is routinely in debt and you don't want to give them cash because you fear they won't use it wisely, you could provide financial help in other ways instead.  You could, for example, offer to make a credit card payment for them or could buy gift cards for gas and groceries to alleviate some of these essential expenses.

By giving non-cash financial help, you eliminate the problem of telling your loved one what to do with the money you give -- but you also make sure it's put to good use to help get debt paid off faster or to cover essential living expenses so they won't go on a credit card.

Share your own stories or experiences

Often people who are in debt are embarrassed to ask for advice from friends and family members -- and they may not be receptive if you offer unsolicited advice about how you think they can fix their finances.

They may be much more willing to open up to you if you talk about past money troubles or challenges you have faced or share details on your journey about how you learned to manage money.

You can open the door to talking about finances in a casual conversation. If you're talking about a vacation, for example, you could mention how you developed a system for budgeting and saving up for trips so you don't have to go into debt or could talk about how you had trouble paying off a vacation in the past.

Many people do have money issues that they struggle with at some point in their lives, so talking about them doesn't have to be taboo. Once you've opened the door to sharing your own financial vulnerabilities, your loved one may be much more willing to talk about their own struggles and even to ask for your help breaking the debt cycle.

Be ready with helpful suggestions and tips

If your loved one asks for advice, or you think they may be receptive to it, you can provide some tips about how to tackle debt. Some of the concrete steps you could help your family member to take include:

• Making a budget that allocates cash to debt repayment and that cuts spending to free up cash for extra debt payments
• Developing a payoff plan, such as the debt snowball or debt avalanche plan
• Automating payments to creditors so bills aren't late in the future
• Refinancing debt to a lower rate loan in order to reduce the total interest cost and make repayment easier

Offering this kind of advice without being asked can be tricky, especially as you don't want to overstep your bounds and put your relationship at risk. But if the family member is someone you are especially close to, such as a child or a parent who you sense is having a difficult time taking control of their finances, you may decide that it's worth the risk to stick your neck out and provide financial suggestions even if you're not asked.

Of course if a family member does request a loan or other financial help from you, that opens the door to providing these suggestions and this type of aid. In fact, you might say "I don't have the money to give you a loan right now, but I'd be happy to help you make a budget or look into options for refinancing high interest debt.

Ultimately, there's only so much you can -- and should -- do

While you can take some of these steps to provide help for a loved one who is in debt, ultimately your family member is the only person who can fix their financial situation. You can provide support, but the hardest thing you may have to do is accept that you can't solve the problem. Giving a loan or cosigning for one would just be a short-term fix unless or until your family member is ready to live on a budget and get serious about paying back debt that's owed.