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Do you often lend $$ to friends or family?
Old 03-26-2010, 05:57 PM   #1
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Do you often lend $$ to friends or family?

If not, how do you say "no"?

I normally say, "I have a strict investing plan that leaves me with very little free cash." That's pretty accurate.

Just wonder how the rest of you decline the request, when you do decline.
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Old 03-26-2010, 06:06 PM   #2
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No one(family or friend) has ever asked me for money. If I were asked, and could afford it, I would make a gift of the sum(within reason) depending on who is was, what it was needed for, and if I could afford such a gesture. I would not subsidize an open ended arrangement with a deadbeat.
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Old 03-26-2010, 06:23 PM   #3
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I have never been asked for any significant amounts of money. Which makes sense: I don't think any of my friends think I have a significant amount of money.
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Old 03-26-2010, 06:32 PM   #4
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My family is wealthier than me, so they never ask, thus I've never had to say no.
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Old 03-26-2010, 06:35 PM   #5
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We loaned a few hundred bucks to DW's brother one time and despite my doubts, he paid it back in a year (no interest).

I am pretty uneasy lending money to family and friends. I'd rather gift it if it was truly imporant and someone close. We've done this over the years -- paid off parents' mortgage, bought cars, etc.

To me, lending can make it pretty uncomfortable around the dining room table come Thanksgiving.
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Old 03-26-2010, 06:48 PM   #6
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I loaned a sizable amount to one of my nephews when he was opening up a new bbq restaurant. He already had another location which was doing well so I felt pretty good about getting it back. That was a little over a year ago and he has already paid 80% of it back. Should have the balance by summer time. But I told him it was a one time thing and that it will be.
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Old 03-26-2010, 06:58 PM   #7
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I've never been asked for a loan by family members. OK, I have, but only the kids asking "I forgot to go to the bank, can I borrow $20". For them I usually hand it over. Once I responded to DD with "borrow, you mean you plan to repay me?". Her response was "Ok, can I have $20"".

I have offered to lend to family members twice. In a about 3 weeks we will observe the anniversary of BIL's death. He died a relatively wealthy man (estate was > $2M). I was his executor. My SisterIL had enough in her own name to live on for about 1 year. She was more or less OK. Anyway, BIL was a farmer and had been 'grooming' his DD and SonIL to take over the farm. The kids had nada. They wanted to go for it (as in take over the farm) but no bank would touch them for an operating loan since I, as executor, couldn't even offer a lease until probate was over. This was 2 weeks before seeding time.

I offered (and then gave) the kids a 6 figure loan to plant a crop. Later, SiIL didn't like living in her house without her DH, another much better place was for sale & I offered her a 6 digit loan to buy it.
SiIL repaid me when she got the estate (she got it all) and insisted on giving me interest. I took it.
The kids had a hard time of it, but repaid me, offered interest, I rejected it. I told them that if I hadn't lent the money to them I'd have lost a bunch of it on the stock market. I didn't lie, if I hadn't lent it to them, my NW would be lower than today.

The key part is that I was willing to consider all of these as gifts if it didn't work out. However, I think the recipients of the loans would have avoided me if they couldn't repay the loans. That was my biggest fear when I had them. I like all my family members and want them around.

Say yes, say no. Use your judgment. These are the questions I asked myself. All answers were yes.
  • Who are the people asking? Will they try to repay you.
  • Do you care about them?
  • Is it likely they will repay you.
  • Is it OK if you are not repayed?
Of course, YMMV
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Old 03-26-2010, 07:09 PM   #8
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Once I had a friend who was down on her luck with a deadbeat spouse. She needed some cash urgently to pay the rent and was very stressed out. I offered to lend her some money interest free on a one time emergency basis with no deadline. She paid me back in cash within three months and included interest, which I returned. She was very grateful. I will not do this again as it was an unexpected emergency and I expect her to get her financial affairs in order, which she is quite capable of doing.
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Old 03-26-2010, 07:18 PM   #9
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I don't think I have ever been asked but if I were I would gift the money if I felt it was a worthy request. Several times I have given money when the need was apparent but no request was made. A loan would be a potential problem I think. Gifts are so much more fun.
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Old 03-26-2010, 07:21 PM   #10
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My only significant loan was to a colleague at work. She needed to buy a car and found exactly what she was looking for. Unfortunately, being only a couple years out of college, she never had borrowed any money so banks wouldn't loan her the necessary funds. I offered to make her the loan at a reduced interest amount for three years. We drew up loan papers which she gladly signed identifying the interest amount and loan period. She was very good a paying it back regularly and paid it off about six months early. I looked at it as a "win-win" situation - She got her car and I got a return on $8,000 that was much better than the bank savings account.

I wouldn't do it regularly but this time it worked out well for everyone involved.
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Old 03-26-2010, 07:35 PM   #11
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I have never been asked for any significant amounts of money. Which makes sense: I don't think any of my friends think I have a significant amount of money.
Same "problem" here. Friends & family are probably afraid that I'm going to ask them for money.

We also tell our kid not to expect her inheritance (if any) before her 75th birthday. Of course at this stage of her life, she perceives that age 25 and age 75 are about the same distance away from today.
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Old 03-26-2010, 07:42 PM   #12
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I have never loaned money to family. I just don't believe in it. I've seen too many cases of money creating problems in families, including my own. I was not the lender.

I did loan money to a friend once to help her with divorce legal costs. I loaned $500, she repaid $100, I never saw the rest of it. Lesson learned.

My policy now is never loan money. Call me Scrooge, but to me, the quickest way to create problems in personal relationships is to be asked to act like a creditor. On the flip side, if I hear of someone with money problems, I have bought small size gift cards for gas and groceries here and there to help out in times of sickness or hardship.

My response to any wanna-be borrowers is always along these lines...
"I'm on a fixed income. Maybe you could check with the local credit union for a personal line of credit. They have really low interest rates."
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Old 03-26-2010, 07:45 PM   #13
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I was asked to invest a 5 figure amount in the gift store business of my sister's partner. I stewed for a couple of weeks not giving an answer while trying to decide whether it would make sense as a business proposition charging credit card interest rates. When I spoke with her again she said "You don't seem interested in doing this so lets forget about it because it would just be be awkward for us". I was relieved.

The main issue with loans for me is that it mixes up support and business. It's usually not clear the recipient understands how supportive you are being by extending a loan that may not be paid back, because they typically got into the position of needing money by not fully understanding financial risks.

I used to do loans to my sister at credit card interest rates, figuring it would compensate me for the lost time value of my money and some for the hassle involved so I wouldn't have to feel like I was being taken advantage of. But my thinking now is that because she just doesn't have a good track record with money, that there's no reasonable risk premium I could charge that would adequately compensate me. Seeing the recent financial crisis play out reinforced this for me.

In the future I think I'll just separate the support out into a gift so we can all sleep at night afterwards. It's much more fun to be sporadically gifting smaller things back and forth than to be collecting loan payments, and recently we've been doing just that.
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Old 03-26-2010, 07:56 PM   #14
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Have given "loans" to family members, in the back of our minds knowing we'll never get the money back. DH says this is our "insurance" that if they ever ask again, we will be able to say "You can't come to the well twice."

One family member has paid back, and the second is trying. Two others have not and avoid the topic completely. One was expected, the other is a disappointment (he's paid us back before, so we thought he would again).

Deciding on whether to "loan" or not is a significantly stressful experience for DH and I. Typically the person comes to us with a "dire" need...i.e. "I'll lose my house otherwise!" Uggh.
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Old 03-26-2010, 08:09 PM   #15
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We regularly gift money to family members. Mostly its unsolicited, but a couple of times we've been "hinted at" about the timing of a special expense.

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Old 03-26-2010, 08:17 PM   #16
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Friends & family are probably afraid that I'm going to ask them for money.
Same here, and I do everything possible to maintain that expectation!

But I have other friends who, whenever they sense I'm disengaged from the 9-5, automatically assume I'm a billionaire. I've also been accused of being a drug dealer and and CIA operative. These same people usually get around to asking me for $$. Occasionally a legit request and I lend, but more often a bailout for something like spending too much at the Disney store (actual case).

But saying "no" is always hard for me. I've said "yes" and felt like an idiot when the person & money disappeared.
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Old 03-26-2010, 08:21 PM   #17
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...But saying "no" is always hard for me. I've said "yes" and felt like an idiot when the person & money disappeared.
Allow me to temporarily inject some Noo Yawker into your veins...use this phrase for the more agressive bottom feeders requesters...

"Take a hike"

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Old 03-26-2010, 08:24 PM   #18
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I have never loaned money to family. I just don't believe in it. I've seen too many cases of money creating problems in families, including my own. I was not the lender.

I did loan money to a friend once to help her with divorce legal costs. I loaned $500, she repaid $100, I never saw the rest of it. Lesson learned.

My policy now is never loan money. Call me Scrooge, but to me, the quickest way to create problems in personal relationships is to be asked to act like a creditor. On the flip side, if I hear of someone with money problems, I have bought small size gift cards for gas and groceries here and there to help out in times of sickness or hardship.

My response to any wanna-be borrowers is always along these lines...
"I'm on a fixed income. Maybe you could check with the local credit union for a personal line of credit. They have really low interest rates."
Exactly. It is not a favor to them or to yourself if it ruins the relationship, which it all too often seems to do. Either give them the money outright or say no.
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Old 03-26-2010, 08:28 PM   #19
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Either give them the money outright or say no.
But you have to explain the "no" decision if the person is at all close to you. What do you say?
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Old 03-26-2010, 08:35 PM   #20
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I basically do not lend money.
I tell most people that I'm going to do them a favor by not lending it to them. That way we are always friends or relatives and have no problems. Might be strange to some but I think it is best.
That way I'm never mad or looking for them and they are not looking for me. No hard feelings over trivial things, life is much better.
I just think it is the best policy.
I jokingly tell people I don't get in the banker's business and he doesn't get in mine. Jokingly but I really mean it.
If you want money get an official loan.
There are times I give things/money to people though. When I feel it is needed or will help in some way.
I'd rather just give it than be concerned about collecting money down the road. I have more peace of mind that way.
I guess it is obvious my experience with loaning things has not been pleasant. I do my best to never borrow or loan, anything. I'd rather do without.
Just my thoughts off the cuff,
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