Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-08-2012, 10:29 AM   #21
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,373
Quote:
Originally Posted by JohnDoe View Post
Some of the funds are to pay his daughter's car insurance - she just started driving. Some to help complete a home improvement project. I think the rest is to start an emergency fund and piece of mind.
Thanks, JD--apologies for my nosiness inquisitiveness.

You are a good friend to him, and I would lend money for these things too to someone with a good track record of repayment of your friend.
__________________

__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-08-2012, 11:42 AM   #22
gone traveling
 
Join Date: Jul 2012
Posts: 13
I never loan money to friends or family. If I give them any, its a gift. A legal document between you and your friend is only useful if you intend to enforce it. At that point you no longer have a friend.
__________________

__________________
Wasting is offline   Reply With Quote
Old 07-08-2012, 12:39 PM   #23
Thinks s/he gets paid by the post
 
Join Date: May 2006
Location: Largo
Posts: 1,945
Formal paper needed in case of death of the borrower to make a claim against the estate which can pay it back.
__________________
Buckeye is offline   Reply With Quote
Old 07-08-2012, 02:01 PM   #24
Thinks s/he gets paid by the post
 
Join Date: Feb 2007
Posts: 2,423
Quote:
Originally Posted by JohnDoe View Post
Some of the funds are to pay his daughter's car insurance - she just started driving. Some to help complete a home improvement project. I think the rest is to start an emergency fund and piece of mind.
You said he's in much better financial shape now, borrowing to pay his daughter's car insurance seems odd. This is a recurring expense that he needs to cover.

It feels backwards to start an emergency fund and look for peace of mind with borrowed money. How is it his emergency fund if it's debt?

I can see why you'd be willing to do this since you have 2 previous experiences where it has worked out well. So far it's been a positive experience..... until it's not.

A notarized document seems like a good idea. Or at least an actual loan document, just in case he dies. Does he have equity in his home or other assets? 5K isn't that large of an amount.

When I needed to notarize a document our city hall had one available for no charge. I don't know if that's standard in other cities.
__________________
Married, both 62. DH retired June, 2010. I have a pleasant little part time job.
Sue J is offline   Reply With Quote
Old 07-09-2012, 07:32 AM   #25
Recycles dryer sheets
 
Join Date: Jun 2002
Posts: 367
Quote:
Originally Posted by Meadbh View Post
Is your friend's line of work such that the people he owes money to might come after you?

HehHeh!
No, not at all. He run's a legitmate business. I have several self employed friends and many of them run into instances where they owe alot of money, but are still waiting to get paid. One of my friends (not the one I loan money to) runs his own body shop. He has a trucking company as a major account and works on most of their vehicles. He floats the expenses to fix the trucks, and they may take more than 30 days to pay him and his bills come due before then. He simply needs a bridge loan.

My friend I do loan money to has circumstances similar to this. He runs a trucking company.

No worries, it's all legit, I wouldn't do ANYTHING to endanger my ER, lol!
__________________
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance
panhead is offline   Reply With Quote
Old 07-09-2012, 08:10 AM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
So, if the business is profitable, it needs to build a greater cash reserve from retained earnings, no?
__________________
Meadbh is offline   Reply With Quote
Old 07-09-2012, 08:20 AM   #27
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,127
I could have missed this, but do you charge interest? Probably should. Otherwise you encourage his dependancy.
__________________
Danmar is offline   Reply With Quote
Old 07-09-2012, 12:03 PM   #28
Recycles dryer sheets
 
Join Date: Jun 2002
Posts: 367
Quote:
Originally Posted by Meadbh View Post
So, if the business is profitable, it needs to build a greater cash reserve from retained earnings, no?

I don't want to drag this too off topic about me, so hopefully this helps the OP, but yes, I do charge interest (if that was targeted at me). It's a VERY attractive rate as well, and my friend suggests the rate.

As for the above comment, yes, he absolutely has trouble building a cash reserve. Like most people, he has a lot of trouble saving, thus the need for the revolving credit line.
__________________
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance
panhead is offline   Reply With Quote
Old 07-09-2012, 12:07 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
Maybe the best favor you could do your businessman friend is to give him a gift of advice on cash flow management. Then decline any further loans. Ask for equity instead.
__________________
Meadbh is offline   Reply With Quote
Old 07-09-2012, 12:38 PM   #30
Recycles dryer sheets
 
Join Date: Jun 2002
Posts: 367
Quote:
Originally Posted by Meadbh View Post
Maybe the best favor you could do your businessman friend is to give him a gift of advice on cash flow management. Then decline any further loans. Ask for equity instead.

We've had these discussions, but it's sort of like trying to explain RE to someone who doesn't see how it's possible. The "business" consists pretty much of him and a couple of container trucks. He had another guy working for him, but his major contract got cut back so he had to let him go and sell a truck. He makes plenty to support himself, he really has no debt (other than to me obviously), not even a mortgage payment and he owns his trucks outright. He likes his toys (cool cars, trucks, etc) and when he runs into real trouble, he liquidates those.

Cash flow management? Not this guy, he will live hand to mouth till the end. Really good guy, but that's the way it is for a lot of people.
__________________
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance
panhead is offline   Reply With Quote
Old 07-09-2012, 01:54 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2006
Posts: 11,017
Then it is a lifestyle business, generating only enough income for the boss, but no significant retained earnings. You don't want equity in that!
__________________
Meadbh is offline   Reply With Quote
Old 07-10-2012, 02:46 PM   #32
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
I follow the Dave Ramsey approach to this question. IMO a loan changes the nature of the relationship. If the person is THAT GOOD of a friend, then GIVE him/her the money. If they honor you as a friend, they might pay it back. If not, at least you had no expectation...so there will be no change in the relationship.

Please allow me to tell a story. I'm a sports car fanatic...I have two myself and belong to clubs/web forums. About 5 years ago I was at an event and met many people who had bought the same 2007 Shelby GT500 that I did. One of the people was named Glen (I've changed the name). We hit it off and then talked 3-4 times per year. In 2009 I returned to the same show and we spent some time together.

Then in late 2009, he sent me an email and asked if he could borrow some money. He said he had lost his job, and was going to lose his car if he didn't make his payments soon. I politely told him that I'm sorry, but I don't lend money to others, it's a family policy we have. I also did not want to "give" him the money...as this was an "extra" car that he used on weekends and for fun...not his daily car. So I suggested he sell the car and pay off the loan and be done with it. He was offended by this and stopped talking to me.

In 2010, I went to the show again...and found out that he had died just a month after asking me to borrow the money.

Had I loaned him the money, just think how awkward it would have been for me to even ask to have it paid back...not to mention that his estate may not have even had enough money to pay me regardless.
__________________
"Live every day as if it were your last, and one day you'll be right" - unknown
Finance Dave is offline   Reply With Quote
Old 07-11-2012, 09:23 AM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
freebird5825's Avatar
 
Join Date: Feb 2008
Location: East Nowhere, 43N Latitude, NY
Posts: 9,017
Quote:
Originally Posted by JohnDoe View Post
Some of the funds are to pay his daughter's car insurance - she just started driving. Some to help complete a home improvement project. I think the rest is to start an emergency fund and piece of mind.
From the outside of the aquarium...

I see a 1-sided loaning relationship, i.e. no mention of him helping you in tough times. Correct me if I assumed incorrectly.

A few things to consider...
The daughter can finance her own insurance, i.e. put some skin in the game.
The HI project may not be critical to complete.
The emergency fund could be accomplished by your friend opening a line of credit with a bank or credit union. Or saving.

IMHO, if this were an emergency situation, I would be the first to GIVE money to friends whose home was damaged, or needed food and/or shelter. Critical situations need fast solutions.

My suggestion is to close the Bank of JohnDoe, gently but permanently.
__________________
"All our dreams can come true, if we have the courage to pursue them." - Walt Disney
freebird5825 is offline   Reply With Quote
Old 07-11-2012, 10:39 AM   #34
Thinks s/he gets paid by the post
 
Join Date: May 2006
Location: Largo
Posts: 1,945
Quote:
Originally Posted by Finance Dave View Post
I follow the Dave Ramsey approach to this question. IMO a loan changes the nature of the relationship. If the person is THAT GOOD of a friend, then GIVE him/her the money. If they honor you as a friend, they might pay it back. If not, at least you had no expectation...so there will be no change in the relationship.
I can agree with you in theory, but as a practical matter, lending money to a friend can be good for both the lender and the borrower. I lent a friend (I have know this person for 48 years) tens of thousands of dollars to finance her portion of the purchase of a waterfront vacation property on Whidbey Island in the Seattle area.

She and other extended family members own two more adjoining lots. The third property was purchased 7 years prior directly from a neighbor (cheap, relatively speaking). She and 2 other family members are on the title to this property. One of them had done a balloon refinance of his home to raise the original cash to purchase the property and the others paid him monthly. Now it was time for him to refinance so everyone needed to finance their one third.

I needed somewhere to put money and get a decent interest rate and she was looking for a chunk of cash so we drew up formal paperwork for a loan. The interest rate is 5% and the arrangement can be terminated by either person at any time. Interestingly, it did not change our relationship in the slightest. It's like the deal was done with "business her" and "business me" and not the two of us as friends.

At the time we made our arrangement, she did not have a HELOC on her home which had about $200k in equity. She said she didn't need one so I told her that's the time to get one! She did get one and she could pull from there to pay me off if I needed my cash in a hurry.

She has her payments on autopay out of her checking account directly into mine. No muss, no fuss for the last 3 years! I report it on my return, she deducts it on her return. It's a 15-year amortization with a 5-year term. I hope she renews 'cause I don't see rates going up anytime soon.
__________________
Buckeye is offline   Reply With Quote
Old 07-21-2012, 09:17 AM   #35
Dryer sheet wannabe
 
Join Date: Apr 2009
Posts: 14
Quote:
Originally Posted by LeavingOhio View Post
John, I would say you are fortunate to have gotten that loaned money back. Many people in your situation (the lender) don't get their money back. A listen to Dave Ramsey's radio show would show that to be true.

Several years ago, a close relative had loaned a cousin a lot of money to buy a lot and build a house to sell. Promised a 12% return. He built the house and he ended up stalling for months saying it wouldn't sell. This close relative finally hired a lawyer since it was out of town. Turned out the cousin moved into the new house and was renting the old one and collecting the money for himself. He even took out a large loan on the new house! They forced him to sell the rented house and make only min payments (less than 1/2 of what he should have been paying) since the cousin said he could not afford the payments and would file for bankruptcy and this close relative would get nothing. They put a lien on the house since they could not force him to sell and move out of his now primary residence (law in that state).

Just a couple of years ago, the cousin asked this close relative for more money! He said he could not make the mortgage payments! What nerve! He ended up losing the house. The secondary lien was worthless since he owned more on the house than it was worth. I later found out that he was able to buy another smaller house in just a year or so!

After my close relative recently passed away he stopped making the min payments. The lawyer said it would be like getting blood from a stone and not worth the $$ to go after him. We found other creditors already garnishing his wages.

Another relative has a similar story (2 times!), luckily less money involved. It was an emergency, and needed the $$ fast. Probably never see a penny back.

Another family member wanted to borrow over $140k from us to build a house and sell...makes lots of $$ he said. This was in 2009 when everything had crashed! He had taken $130k from another relative a couple of years before this doing the same thing, buy a lot, build a house, make lots of $$. All was lost. I could not even find a record of him buying land to build this house, might have been a scam. Well, he ended up losing his house about a year after that. I found that had pulled out over $550k from a house that just sold at auction for $300k. I think he wanted the $$ to fend off creditors a little longer until the economy picked up. Luckily I said no. He tended to live above his means which was a red flag too.

I think it's best to tell people your not a bank...especially if your are ER.
__________________
timekeepr is offline   Reply With Quote
Old 07-21-2012, 12:56 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,880
Back in 1963 I loaned a friend $10 as he was tapped out and I had $25 in my checking account at the time. I recall trying to track down the friend for over a year before cornering him and demanding repayment. I got the $10 back and I have never lent money to a friend since. I have, however, given gifts to friends on occasion and not expected any re-gifting.
__________________

__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 11:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.