Ask Sindie: Debts v shares: a couple pulled in two directions
A reader asks if his partner can afford a £3,000 holding in BT when she owes nearly £4,500
Sunday 12 March 2006
Q. My partner is struggling to pay back nearly £4,500 in debt.
She could wipe out much of this if she sold some £3,000 of BT shares (in actual certificates) inherited from her grandparents several years ago.
While she acknowledges this would get her out of a financial hole, she says she's become "emotionally attached" to the shares and would rather not touch them. I've never heard of this before and it's becoming a bit of an issue between us - although I'm in no position to help financially myself.
We're both on low salaries and plan to buy a home together, yet it's a distant dream given our finances today.
Using the money would make a huge difference.
A: This kind of "attachment" is not as unusual as you might think - particularly in the case of an inheritance, says Ben Yearsley of independent financial adviser (IFA) Hargreaves Lansdown. "Emotional ties to shares can be very real, and it can become even more complicated if the share price goes up."
Even professional fund managers get attached, adds Justin Modray of IFA Best-invest. "A very close bond can be formed if they were among the first to buy into a small company [when the shares were cheap] and are familiar with that firm and its management."
However, he says, the managers usually rely on their fear of losing money to make sure they don't become too love struck.
Your partner, of course, is in a different position, but Mr Modray suggests "taking a very long, hard look" at the debt figures to see whether sentiment comes at too high a price.
"If the debt is with a number of credit cards, the annual percentage rates could be as high as 15 per cent - that's an awful lot of interest."
And given that you plan a life together, it could be worth pointing out gently that your financial future is more important than fond memories, he adds.
"It's not cheap to settle down, find a deposit on a house and get a mortgage. The cost of the debt won't make it easy."
Mr Yearsley agrees: "If you're in debt, you have to be hard-nosed."
It won't cost much to sell the shares. Since your partner has the original certificates - and not stock held electronically in an account set up by a particular stockbroker - she can use any broker she wants. Nor is there any tax to pay: stamp duty is levied at 0.5 per cent only when you buy shares.
Although there is a stockbroker fee for selling, it shouldn't be any more than 1 per cent, says Mr Modray.
He suggests she try a local high-street bank. The Halifax, for example, will accept her certificates and charge 1.25 per cent to sell them - in her case, £37.50.
Alternatively, Hargreaves Lansdown has a broking arm that will charge 1 per cent of the total sale - £30.
If your partner digs her heels in, there are steps she can take to make the debt more manageable. A handful of credit cards are offering 0 per cent deals on balance transfers, which could let her shift more expensive debt over and cut the interest. Try www.moneysupermarket.com for a list of competitive cards.
Write to Sindie at The Independent on Sunday, Independent House, 191 Marsh Wall, London E14 9RS or email email@example.com. We cannot return documents or guarantee to answer letters. We accept no legal responsibility for advice given
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