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Old 05-21-2009, 08:36 AM   #21
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I lent a friend $12,000. once with no paper work. I had a feeling I'd never see it back since I knew he had financial problems. 7 years later, we dont' talk anymore and I know I won't see the money. Now I just say................sorry. That's the only amount I never got back, the others weren't a problem.
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Old 05-21-2009, 10:56 AM   #22
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I loaned a friend $900 a few years ago because she needed cash for the deposit on her new apartment and was having some kind of cash flow issue (I forget exactly what). Verbal agreement, I knew she'd have the money to pay me back in a few weeks, which is what she did. We're still good friends.
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Old 05-21-2009, 11:07 AM   #23
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I've never loaned to a friend because I would only want to do so if I were going to be paid back, and there's no real way of knowing if they intend to do so. But I've only been asked once and it was clear that they were not financially responsible, so it was an easy call. I'm not sure what I'd do if a friend who appeared responsible asked.

One big factor would be whether the friend showed that they understood what a favor it was for me to lend the money, and intended to reciprocate.

Just from this thread it is clear that a significant portion of friend loans (at least a third) don't get paid back. Sadly, that's much worse than "real" loans, which have to be paid back in much higher numbers for the lenders to make money.

That's why I would want credit card type interest (~18%) on a friend loan. If they aren't willing to pay credit card interest then they either don't really need the money or are wanting a gift more than a loan.
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Old 05-21-2009, 11:27 AM   #24
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We've loaned to family, friends, acquaintances, and total strangers. I prefer acquaintances. Just did a further loan to some young neighbors who are doing smart things with their money - we admire their hard work and way of conducting their lives. They are competent. We've loaned to them at 2 points less than we loan to strangers and in the least expensive way possible (getting a title company sort report rather than title insurance on their encumbered property for instance). We choose to make it easier for them to succeed.

We've loaned to some other neighbors with no interest on a very short term basis when they had some emergencies that money would help - again, we knew how they conducted their lives and we were repaid promptly. Frankly, while the latter couple is very hard working, they aren't as financially savvy and are more prone to drama in their lives - prefer to make money on loans and have less drama.

Smaller loans made to workplace friends by my gal have been problematic - high default rate, expectation of further loans as they fall deeper into a pit of debt, way too much hassle and drama and bad feelings on small amounts. I'm funny - it bugs me as much to have someone fail to do what they say on a small amount as on a large.

Family loans have been repaid at no or savings account rates, but we've rarely been asked - kudos to family for that!
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Old 05-21-2009, 12:22 PM   #25
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I don't think you "loan" friends or family money - you "give" it to them with a possibility of seeing it given back to you.

I've loaned given family money several thousand dollars - "I'll get the money back as soon as ____". Never saw any of it back.

That's OK. I viewed it as as a non-deductible charity donation. I try to help people.
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Old 05-21-2009, 12:43 PM   #26
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A lot of generous people on the board.

I doubt I would be able to see big sums walk away without some anger, but I congratulate those who can.

Ha
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Old 05-21-2009, 01:49 PM   #27
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A lot of generous people on the board.

I doubt I would be able to see big sums walk away without some anger, but I congratulate those who can.

Ha
I was being polite about the gal who stiffed me, in accordance with forum rules. I ain't no lady when it comes to trust broken.
She is the last person I will ever loan money to. No exceptions, even with a written agreement.
Just call me the Grinchette from here forward.
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Old 05-21-2009, 04:03 PM   #28
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I don't think you "loan" friends or family money - you "give" it to them with a possibility of seeing it given back to you.

I've loaned given family money several thousand dollars - "I'll get the money back as soon as ____". Never saw any of it back.

That's OK. I viewed it as as a non-deductible charity donation. I try to help people.
Early childhood training - when i was about 11 years old my folks borrowed $135 from me - my liquid assets in full back then - and we all attended the Hudspeth Land & Livestock auction. Over the days of that registered Hereford auction i think they bought about a dozen animals, the start of our Hereford adventure. Think i was paid back with some interest and, i know, a Jersey/Guernsey cross calf. Beef people may have an idea how sturdy that Jersey calf was. Hybrid vigor my a**.
Have learned that if you expect to see the money back you need to express, usually in writing, your expectations. Not loaning to those who are cavalier about returning favors or food or money or loyalty is a good plan. I try to have friends who are solid that way; family, you get luck of the draw
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Old 05-21-2009, 07:18 PM   #29
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As a child, I recall coming home from school and finding my piggy bank raided (with a note that they needed the money for gas - and it was paid back).

I don't loan money. I occasionally give it; if it's paid back that's even better.

Anecdote: Back in 1969 my parents were recovering emotionally and financially from my brother's death and were preparing to go on a vacation. Father's sister called and said she "needed $800" (do the inflation work) (to keep their brother out of jail). Father said: "So do I." and hung up the phone.
He knew he would never get it back.
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Old 05-22-2009, 12:13 AM   #30
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I don't think you "loan" friends or family money - you "give" it to them with a possibility of seeing it given back to you.

I've loaned given family money several thousand dollars - "I'll get the money back as soon as ____". Never saw any of it back.

That's OK. I viewed it as as a non-deductible charity donation. I try to help people.
I'm a bit like you. A couple of years ago BIL died unexpectedly. He was a farmer and his DD and SIL had been working with him to eventually take over the farm. He died 3 weeks before seeding and his estate was in limbo. His DD and SIL wanted to run with it but had no source of money, even his DW was hard up while his estate was going through the legal motions.

I loaned BIL's wife $80K to change houses amd was repaid when her inheritance came 8 months later. Even though I didn't ask for interest, she insisted on about 5%.

I loaned the kids 100K to pay the farming bills (and their living expenses while farming), since they had no money, no lease (estate land) and no 'promise', the banks wouldn't touch them. They had a couple of bad crops and a bit of other bad luck. Since I had considered that this might be a gift, it didn't bother me too much. Today, they dropped by with a cheque for 50K, and a promise of more to come.

You reap what you sow.
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Old 05-22-2009, 12:14 AM   #31
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The only person I've ever loaned money to, come to think of it, was my ex-spouse. When we were dating we'd loan each other money for rent or whatever; probably never more than $100 either way, and it always got paid back. At least until we were engaged anyway -- at that point I think it didn't seem to make sense (we were a joint accounts household).

We did let her parents stay rent free with us for about 8 months, we bought her sister a used car, and we gave her brother a "scholarship" / college gift. It was interesting to observe that these things didn't really give them a hand up; they all pretty much were in the same situation 6 months afterwards.

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Old 05-22-2009, 09:17 AM   #32
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I had a friend loan me $100 once years and years ago. It took me a long time to pay it back and we were close to bad feelings. But we are still close friends. Paying late is highly embarrassing, even if it is only a few weeks late. So to the OP, get in touch with your friend, he may be too embarrassed to get in touch with you.

With family, if I know that it is not reasonable for them to pay it back I say it is a gift, not a loan. Why shame them with their inability to repay? If it is a loan I make it very clear with clear expectations. For example, a few days ago I loaned my niece money to buy a stroller. She is going to be paid June 1. I said that I expected the money back June 2 and if that didn't work for them I wouldn't make the loan.
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Old 05-22-2009, 04:32 PM   #33
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We've loaned to family, friends, acquaintances, and total strangers. I prefer acquaintances.
Interesting I've had opposite experience. The few loans I've made to friends have been repaid promptly. I have also loaned money via Prosper.com to total strangers. On Prosper I've experienced horrendous default rates close to 40%. Acquaintances, have been the worse, either they've been very slow in paying or in one case skipped town. Of course there is difference between the couple you describe and poker players!
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Old 05-22-2009, 05:21 PM   #34
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On Prosper I've experienced horrendous default rates close to 40%.
I have never been able to understand how a guy could come out on making unsecured loans to strangers unless he has a staff with some guys named Vlad and Vinnie and Hector Malacosa to help with collections.

Ha
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Old 05-22-2009, 05:59 PM   #35
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I had a neighbor in college who borrowed about 1000. (all 100 or 200 at a time.) and he'd pay it back slowly, (25 at a time) until I stopped loaning to him because he got so far behind on payments, but kept wanting to borrow. He got upset about this and stopped paying me back all together. I threatened small claims court, and the mf'er skipped town. I lost about a grand in all. I needed the money bad too.

I started an investment club with 5 friends who all agreed to pay me their share of 300 a piece. I put up the full amount. (1800). They all paid it back between a week and 3 months. (4 all at once, 1 on installments. It was the funny, the guy paying on installments makes close to 100k)

Then, my old work partner...I let him borow a few hundred for Christmas, got paid back, a few hundred more for car repairs, got paid back, a few hundred more for something else, got paid back. It was easy to get the money since we saw each other every day, (sometimes hed just buy me lunch or cigarettes until it was paid off) but it was becoming a burdon. Then I got shipped off across the country, and he called and asked to borrow 800 for a security deposit. I was very uneasy about it, but eventually gave in, mailed him a check, and was paid half of it back in one month. Now almost a year has passed, and I still havent seen the other 400, and I believe he has no intentions of paying it back. Its the principle of the thing. And it wouldnt normally upset me so much, but every time I calculate my net worth and see that "negative 400" in the Liabilities column, it makes me sick!
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Old 05-23-2009, 06:56 AM   #36
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I have never been able to understand how a guy could come out on making unsecured loans to strangers unless he has a staff with some guys named Vlad and Vinnie and Hector Malacosa to help with collections.

Ha
Well the 10,000' view, was as follows.


A. Banks make a good deal of money on the spread between regular saving/CDs and loans.
B. Credit reporting companies (Experian, EquiFax etc) generate a credit score which can be reliably used to assess risk. Not much different than Morningstar Mutual fund performance and risk star rating.
C. The internet, and electronic fund transfer can eliminate much of the cost of servicing a loan.
D. Prosper would take on task of credit verification and loan servicing, debt collection.
E. By connecting lender with borrower and cutting out the middle man, lenders good get interest rates well above CD rates while borrowers could get lower interest rates.
F. The combination of risking screwing up your credit rating (late payments on Prosper loans are reported to Experian) and peer pressure would keep loan default to same or lower levels experienced by CC companies.

The problem was that while A, and C were true. B simply was false, and Prosper did horrible job on D. My reasons for trying it was it sounded cool, and more importantly I thought there was a chance that peer-peer lending might be an non-coorelated asset class with junk bond type returns.

I loaned $2500 in late 2006, I expect to get back $1500-$1600 by the end of the year, or a 40% loss, worse than the market performance, but not some much so that I feel particularly angry. After all I could have bought ISM or OSM at par instead.... LOL.
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Old 05-23-2009, 08:33 PM   #37
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On Prosper I've experienced horrendous default rates close to 40%.
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I have never been able to understand how a guy could come out on making unsecured loans to strangers unless he has a staff with some guys named Vlad and Vinnie and Hector Malacosa to help with collections.

Ha
I'm amazed that 60% actually DID pay in full!

So I guess you'd need to charge 50% interest rates or something (would need to know the time frame) to make a profit (but then it would be harder to pay, and the default rates would go up....).

Gee, sounds like the credit card companies are Saints to offer credit at the rates they do!

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Old 05-23-2009, 09:16 PM   #38
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I loaned a relative 200. Didn't pay it back. I learned cheaply. That Ill never loan family or friend money again. Either way there is potential for things go bad. But at least you get you keep your money if it does.
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Old 05-23-2009, 09:52 PM   #39
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I loaned a relative 200. Didn't pay it back. I learned cheaply. That Ill never loan family or friend money again. Either way there is potential for things go bad. But at least you get you keep your money if it does.
That's why i prefer to loan to acquaintances rather than friends or family - don't want bad feelings on either side or embarrassment or weird power position stuff through being a lender - or collection person. Acquaintanceship is close enough to give a good hint about creditworthiness but not close enough to make me worry about bad feelings if things go bad.
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Old 05-23-2009, 10:58 PM   #40
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Last year a neighbor's fridge quit on her just before the Christmas weekend (dead compressor) and she was frantic about the food spoiling. Spouse found a fridge on Craigslist and they went to make the purchase but they needed to have the cash in hand. For whatever reason the neighbor didn't have an ATM card and was going to stand in a long line at the bank (payday Friday) to cash a personal check. She was also fretting over the delay so spouse used her own ATM card and said she could pay her back. She brought over the check next day.

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I have never been asked for money by friends (do I look too poor?)...
Other than the above case, we've never been asked for a loan. Maybe people are afraid that we're going to ask to borrow money from them?

I'd happily loan money to my father. Not sure how I'd feel about the same request from my brother or spouse's family. I'm not sure how I'd respond to a friend's loan request; I think that'd really test the strength of a relationship.
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