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Old 04-27-2010, 07:25 AM   #61
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DW and I are cosigning on a mortgage for her sister and BIL. Only way they could get the house because their other one is not sold. I hate the situation but really had no choice. DW and I are retired, own our house free and clear and have money in the bank. My BIL is supposed to be retired also but still works 40 hrs/wk. That's all well and good as long as he's alive and able to work. If he died, SIL would never be able to afford the house and would have to sell. The house purchase is a good value and could always be sold in this area so I'm not too worried about getting stuck. However, I just don't like the idea of cosigning. Had to loan them $5K about a month ago just to get the mortgage (to show funds for closing). I figure if you don't have a spare $5K in the bank you have no business buying a house.
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Old 04-27-2010, 07:33 AM   #62
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I loaned a relative about $20k to pay the taxes on a ramshackled old four-plex she and her husband own. They were about to lose the property for non-payment of taxes. They are dear hard-working folks, but just can't manage money. The last time I talked with them they had just bought a brand-new suburban, loaded. Seems like their previous 3-year old suburban needed a couple of hundred dollars worth of repair work and their credit cards were maxed out. However, the nice man at the Chevy dealer fixed them up with a brand-new vehicle with no out-of-pocket expense at all. Just sign and drive away.
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Old 04-27-2010, 08:56 AM   #63
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Seems like there are a lot of stories here about non-repayments. I am curious when you gave these loans, did you have the other person sign some sort of IOU? Seems like you can always recover your money from small claims court then (up to 5k) and probably another court for higher amounts. I imagine the court would also make them pay your court fees since you had to go into trouble for filing the "obvious" claim although your time will probably not be reimbursed.

(Plus on the check itself you can write that it's a loan and repayment terms)
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Old 04-27-2010, 09:03 AM   #64
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Sure. The loan I made was "secured" by a note and deed of trust on the property. But would you really foreclose on a relative? One you like and feel sorry for?

Their small business is struggling badly in the poor economy, and I imagine that they feel worse about being behind than I do.

I've just mentally written it off.

But I'm not going to do it again.
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Old 04-27-2010, 09:09 AM   #65
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I know I told this story before, but my FIL made the serious mistake of remarrying to someone he didn't know was a con artist with a long criminal history. Long story short, she got him to take POA on some elderly guy's account she already had POA for. She scammed it big time (to the tune of over $30K) and his name was on the account, so he was potentially criminally responsible, too, even though he only wrote a couple checks on the account to buy the guy beer and cigarettes upon request.

She was locked up for quite some time by this event, both because of her long history and because she was clearly the primary culprit here. Apparently state law had to go after him as well because the victim was elderly or some such, even though the DA was sympathetic to him and mostly considered him an "innocent spouse." They arranged a plea deal that would keep him out of jail, but the problem was: he had to pay half of the scammed amount up front as a down payment toward restitution and he didn't have it. (The financial injustice here is that she did all the damage and he has to pay it all back because he has secure income from SS and a pension -- and she has none.)

We know he got screwed and he won't make this mistake again. So our choices were either to lend him $10,000 for the plea deal and keep him out of jail or let it go to court and a potentially much more serious charge and sentence. We really didn't have a choice here; we sent a check out the next morning.

He's a very proud man and he HATES owing his daughter and SIL. Still, he's under orders from us to not pay back one cent until the restitution payments and all the credit card debt his harpy ex racked up are paid off. Once he's debt free, then he can pay it back a few hundred bucks a month or as much as he can afford. So I think it's a very good idea to be extremely wary of lending money to friends and relatives (unless you don't want to see them again), but sometimes the circumstances can be compelling enough to carve out exceptions to the rule.
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Old 04-27-2010, 09:14 AM   #66
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Yes, everyone can see that this is not the same as loaning giving money to a gambling relative. Most people would do the same as Ziggy has done.
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Old 04-27-2010, 09:42 AM   #67
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Yes, everyone can see that this is not the same as loaning giving money to a gambling relative. Most people would do the same as Ziggy has done.
I have loaned money to relatives before. In one case we took over a car loan and had our note secured by being noted as a lienholder on the car title. It has since been rolled into another car loan (that we carry the note on), and some small consumer debt for a cheap laptop and back to school expenses for her daughter. We are getting 18% interest on it, and we often tell her we will accept prepayment whenever she is ready since it is a lot of interest. I think her credit cards would charge her much more than that (and late fees), and we don't care if she is a couple days late. She has had two more children since these loans were made, but has managed to make payments timely except I think we asked if she needed to hold off on 1 payment when the baby was born, and she accepted.

We have lent $1500 or so to my BIL (DW's bro) to help with filing fees and some other misc. expenses dealing with his immigration paperwork for his wife which he brought over from SE Asia. He is self employed in construction, and needless to say times are slow. He started the immigration paperwork in 2008 and just brought his wife over last month, so it wasn't exactly something he (or us) would want to just drop and withdraw the immigration application after spending a lot of time and money. No interest on this loan, since I expect it will be paid back very quickly and it is small. And he occasionally does free work on our house when his construction jobs are slow.

Another case, I lent my bro a couple thousand bucks to stave off foreclosure "for a month". Six months later, I had to guilt him into repaying me with a sob story about why I really needed my money back loosely based on fact.

In all these cases, needing to borrow money could have been prevented by saving up a little money for these rainy days. My BIL has expressed interest in saving money and setting up an IRA when he gets back on his feet financially. And he just took out a TERM life insurance policy (on my advice) for a very small premium that would provide amply for his new wife's needs. I think BIL has learned by our example - you can have nice things and a comfortable life, but you have to make an effort to but yourself in that position. He is over his fast cars, Vegas vacations, gambling, partying days now I think. We are regarded as the wealthy side of the family that "always has money". I'm glad that some are starting to figure out the reason why.

I don't mind helping, but in a way, these family members know they can always rely on good ole wealthy Fuego and Mrs. Fuego for a loan if they get themselves in a pinch. As a result, they don't see much need to set up emergency fund savings and/or an unused line of cheap credit.

So far, I have not lent money to a relative to pay off gambling debt. Once the relative is on the road to recovery, I will consider it. If you haven't seen the story on this, here it is for your schadenfreude: My reason for urgently needing a HELOC
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Old 04-27-2010, 09:46 AM   #68
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I don't mind helping, but in a way, these family members know they can always rely on good ole wealthy Fuego and Mrs. Fuego for a loan if they get themselves in a pinch. As a result, they don't see much need to set up emergency fund savings and/or an unused line of cheap credit.
Yes, this is indeed the "moral hazard" aspect of becoming the family banker.
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Old 04-27-2010, 02:53 PM   #69
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Sure. The loan I made was "secured" by a note and deed of trust on the property. But would you really foreclose on a relative? One you like and feel sorry for?

Their small business is struggling badly in the poor economy, and I imagine that they feel worse about being behind than I do.

I've just mentally written it off.

But I'm not going to do it again.
That's fine if you are willing to gift the money. Nothing wrong with that. But you should not consider collecting your money as foreclosing on a relative. That relative can go and get a loan from someone else to repay you just like they came to you in the first place. All you'd be doing is collecting on your loan - whether this forces them to foreclose is up to them (e.g. it's up to them to loan money they owe from somewhere else). By NOT collecting on your loan, you are either gifting them the money (which again is fine and sounds like that's what you decided to do in your case), or extending the loan, i.e. loaning the money again to them except with no arranged terms of repayment...
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Old 04-27-2010, 06:03 PM   #70
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I don't lend out money very often, except through KIVA.org which is an organization that allows people to lend money in small amounts to people all over the world. I drive a '91 Honda Accord with no hubcaps and 325,000+ miles. I live in a small but nice older home. I don't think most of my "needy side" of the family knows that I have much money. They drive nicer cars and live in nicer homes than I do, so it might be embarrassing to come to me, the guy who lives modestly, looking for help. For family members in dire need, mom for example, I just give the money rather than lend it. I don't want the money to become an issue between us.
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Old 04-27-2010, 07:00 PM   #71
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+1 on KIVA. My wallet is closed to the family parasites, though they bleed off DW every once in a while (we have separate finances).
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Old 04-27-2010, 07:48 PM   #72
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Siblings - I think that I would if it were an absolute emergency or a situation where it was a temporary matter. My family is pretty close and I know that none of my siblings would ever ask unless it was a last resort situation.
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Old 04-27-2010, 08:07 PM   #73
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We have given money to my in-laws in the distant past. My wife kept records, but I myself truly do not care to see how much it added up to. Perhaps somewhere between $20K and $40K.

We have also gifted money to my parents in the past, but with lesser amounts as they were never in such dire straits. My siblings and I still pitch in to help my widowed mother with some living expenses, such as travel. She doesn't really need the money (she owns the house she lives in, plus a rental), but frequently frets about the cost of living, so we figure we make her feel a bit more secure.

We are fortunate that our siblings are all doing reasonably well financially, and do not have to fear being asked for a substantial loan (which I of course would refuse by claiming our "lumpen slum" resident status).

About loans to friend, I was once asked for a loan of a few thousand dollars from a long-time best friend since high school. I did not ask, but later suspected that he faced a margin call, as he asked to be wired the money. He repaid within a short time, as he promised. No interest was offered nor asked.

Some time later, he asked for another loan, this time of a 5-figure amount. If I remember correctly, it was to buy a house. This time, I had to decline due to the larger amount.

All this was 25 years ago. And we are still friends.
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Old 04-27-2010, 09:29 PM   #74
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Don't know if I've told this before:
Back in 1969, parents were getting ready to go on vacation after recovering from financial difficulties related to my brother's death.
Father's sister called Father: M(their brother) needs $800 (to stay out of jail). Father's reply: "So do I".
He knew it would be money down the drain.

A few years later I asked for some money and got it; they knew they would get it back.
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Old 04-28-2010, 04:29 AM   #75
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In my youth I dumbly added my best friend to a credit card as an authorized user. This was when you couldn't rent cars without one. It had a real low limit (like 1K, maybe 1.5K), so I didn't worry too much. A year or so later, after their business partnership turned to crud, and I had moved and messed up my forwarding addresses (not my most organized days) I got a call from a collector saying I had a six months past due bill and owed $3K. I had it, and paid it. Its been over ten years at this point, he is still my best friend (starving artist type). The money is not that important to me. Lesson learned though - no credit cards, no co-signing. I consider it a gift. He still says he'll pay me back.

My sister gets in trouble ever now and again on her bills. I have made gifts in the 8-900 range from time to time. Its not that often, she never asked (my brother knew she was in trouble to fill her heating oil tank), and its not money I would miss.
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Old 04-28-2010, 04:49 AM   #76
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Amongst our sisters, we do gifts when it involves my parents and the family home. If any of my sisters need money, my parents will lend or give the money - they have done before. If I wish to subsidise the lending or giving, then I give to my parents who will give or lend as they wish. I will not directly get involved with the lending or giving to my sisters or their families. If they approach me directly, I'll likely say no. Be prepared that this will be reciprocal and if you are ok with that, then it is easy to say no. I don't think I need to explain the "no" to them. Just say it is not convenient.
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Old 04-28-2010, 06:56 AM   #77
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In so much as we are cosigning on the mortgage for SIL and BIL to buy the house, I'm wondering how secure we are if we are not on the deed. I think we should be, as coowners. We won't be making any payments against the mortgage or the taxes for that matter. What happens if they get killed in a car wreck? What happens in the estate? We're still responsible for the mortgage. Should there be a separate documate pertaining to our interest in the property? Any thoughts on this?
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Old 04-28-2010, 06:59 AM   #78
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+1 on KIVA. My wallet is closed to the family parasites, though they bleed off DW every once in a while (we have separate finances).
+1 I invest in KIVA also. It amazes me what people can achieve with a very small start.
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Old 04-28-2010, 07:47 AM   #79
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In so much as we are cosigning on the mortgage for SIL and BIL to buy the house, I'm wondering how secure we are if we are not on the deed. I think we should be, as coowners. We won't be making any payments against the mortgage or the taxes for that matter. What happens if they get killed in a car wreck? What happens in the estate? We're still responsible for the mortgage. Should there be a separate documate pertaining to our interest in the property? Any thoughts on this?
Even if they are alive but lose their incomes for some reason or a will to pay for the house, would not you be responsible for the taxes and mortgage as well?
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Old 04-28-2010, 08:08 AM   #80
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Not on your life...... and especially not in retirement.
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