Bank of Mom and Dad: Ruining Grandma's Credit

Each week on SOAPnet’s new original reality series Bank of Mom and Dad, a twenty-something woman who is drowning in debt must pay the ultimate price ... letting her parents move in! With the assistance of money coach Farnoosh Torabi (that's me), Mom and Dad will teach their daughter to rethink her spending habits and transform her relationship with money.

This week we met “daddy’s little princess” Stacey from Landsdale, Pa. The 23-year-old is as an assistant kindergarten teacher struggling to make ends meet. She has more than $25,000 in debt, including several charged-off credit cards. When Stacey turned 18, she exercised her freedom by signing up for five credit cards, which she quickly maxed out.

Furthermore, Stacey has dropped in and out of college with no degree so far, lives at home with her divorced mom (because she can’t afford rent) and spends far too much on frivolous items (like $200 a month on doggy clothes for her pet).

Each month, aside from neglecting her credit dues she ends up short on her car payment. To make matters worse, her car is in her grandmother’s name and by not making the payments Stacey is effectively ruining her grandma’s credit (not to mention their relationship). Oh, Stacey. Here’s what mom, dad and I suggested:


This was a difficult message to get across to Stacey, since she is in love with her sports car. Our advice was to sell the vehicle and find a more affordable used car. The obvious dilemma with this is that Stacey wouldn’t be able to pay down her existing car loan by selling the car at the current market value, but it was financially better than what she’s dealing with now.

Here’s how we advised her to do it: Strike a deal with her local credit union to use some of the money she earns from selling the car to help pay down the existing car loan, then take out a private loan to pay off the remainder of the car loan. Begin paying down the private loan. Paying off the entire car loan allows her to transfer the car’s title to the buyer. With some of the other money she gets from the sale she could use it to buy a less expensive vehicle. In all, she could save at least $100 a month with this strategy.

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