Would you loan money to a family or friend?

[Ready-4-ER-at-14]

I have borrowed from family and I have lent to family and at least two friends. I have also lent to about 100 people or more online through a peer to peer platform.

My father who lived in another state and who had been divorced from my mom when I was quite young, offered to help if I ever needed it when I was in professional school. I had a period of time when I had to pay tuition and my loan was delayed (systemic problem at fed level). I suspected he was making a boastful offer he never intended to make good on, so I asked if he could lend $1000 or so for three months. I expected my money in 30 days and paid him back before he expected it. No memory if I gave interest or not. I was impressed that he actually came through for me.

I lent money to a quite elderly landlord lady who bought into her tenants woe stories and did not have property tax money. I told her I would lend the money but only if she raised rents immediately such that she had positive cash flow. I honestly did not expect to get repaid but was pleasantly surprised when she did so. Think this was a no interest loan.

I currently have a loan to a friend who is a hard worker and came from an economically blighted area. He has a min wage job and works way harder at it that I've ever worked. He had gotten behind on student loans when he moved. and they were ballooning the interest rates upward. I paid it off and am charging no interest. Told him he can make a couple extra payments at end if he wished to but only if he wants to. Going on three or four years of diligent if not perfect payment record.

Loaned money to a son who had gone against my advice re first dwelling. He wanted a mobile home while in school. I advised him to buy a very cheap old one and then give it away when done. (sell at any price). He bought a new a was underwater when he wanted to sell and buy a house. Acquired his loan and he was to send 2k every tax year refund time till repaid. He paid it off after maybe 8 years. Was originally to have interest but waved it after a couple months just due to tax hassle so he could deduct any interest and I pay tax on the interest.

I also made money on lending to individuals online by only lending to the cream of the crop re credit scores, no bankruptcies, no current credit delinquencies. I read the story and could tell a lot about people as to why the wanted the loan.
One wanted a loan to have no debt. I declined that loan.. person went bankrupt on personal loans after using the money on non dischargeable debt like student loans. My goal was to beat cd rates after I factored in bad loans. I was one of the few lenders to be in the black when all was said and done.

 

[MarieIG]

No, other than loaning a friend a few dollars to buy gas or something like that, I don't loan money or co-sign loans (other than with DH to buy house). I do/ would gift to family members depending upon the circumstances.

When DH and I bought our house, DF gave us some money towards a downpayment, and DM gave us a "loan" toward the down payment. (We had also saved money for the downpayment.) However, whenever I took out my checkbook to give DM a check she would not take it! (So that "loan" was really a gift.)

DH and I did pay for children's education, and have helped them with expenses and gifts. DH is the soft touch but all kiddos have been advised that he is not permitted to co-sign any loans.

Oh, I just remembered one loan. My dad asked me if he could borrow my next semester's tuition one year, to pay estimated taxes. So, for him, I didn't bat an eye. (Yes he paid me back on time for school - and as an aside, Dad gave my family and me a lot over the years.)

I was prepared to support my DM if DF passed first (she passed first and it turned out that DF had more resources than I had suspected); and we would give money to DH's parents if needed. That is about it.

 

[Koolau]

DW and I loaned money to BIL. As long as he remained married to his wife, she always made payments. As soon as she got fed up with him and divorced him (money problems among other things) BIL never paid another dime. To maintain a relationship with him, we have never mentioned the unpaid loan. Just family dynamic. YMMV

 

[razztazz]

If you think they need the help and you want to help give it to them not expecting it back. BUt, and this is very important... give it to them only after a long, rambling, soul-crushing lecture full of hautiness and high dudgeon

 

[foxfirev5]

Both DW and I come from very small families. This topic makes me thankful. Never been asked for money and pretty sure we won't. Old Pennsylvania Germans that believe debt is not acceptable.

 

[mystang52]

On another thread on this topic, I paraphrased the very wise sage, Judge Judy. She says to never lend money to family or friends. If you feel obliged, for whatever reason, to help them with money, consider it a gift. Otherwise, you as the lender become the bad guy when you have the audacity to expect to be repaid.

 

[BigNick]

Thanks Blue. I need counseling on how to say no. Would appreciate the thread.

Idea: Ask the relative in question why they don't get the loan from the bank. They can waffle a bit, but ultimately I presume they will reveal that have been turned down as a bad risk, and/or they are maxed out. At that point I would not feel too bad about saying, "Well, the bank has X billion dollars and apparently can't afford to risk lending you $Y thousand; and I certainly don't have X billion".

 

[Meadbh]

You could quote Shakespeare:

Polonius:
Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

 

[Souschef]

I have sort of a different situation, My DS, who is very independent, asked me to lend him enough for a good down payment on a home to avoid PMI. I knew this was very hard for him to do, but I considered it.
When I was first married, my folks loaned us the down payment with no interest as a wedding gift. I executed a 2nd trust deed in their favor until we sold the house. We sold the house, and we sent them the money.
My feeling is that I am paying this forward, and DS offered to execute a 2nd TD in my favor. I do not have a problem with this arrangement YMMV

 

[easysurfer]

Thanks Blue. I need counseling on how to say no. Would appreciate the thread.

You could say something like you have a policy of not loaning money to friends and family. The good thing about that is since they are family, that disqualifies them automatically.

 

[BreathFree]

This! Happened to me with DW's family. However, since it was a relatively small amount ($1500), I agreed to "lending" the money but basically knew it would never be paid back.

I loaned $1200 to a friend for a down payment on a used car. I also figured I would never get it back. He is an old and good friend, but I realize he is not responsible with money and always struggles. I always look at these type of loans as a gift to help a friend or family member, and I am happy I am in a position to help. I think the key is to loan only what you can afford to gift, and if you are paid back, great! On the other hand, if they don't pay you back, and ask for more down the road, then I'll say, "remember that time..."

 

[imokurok]

Gift it or don't do it.

Exactly. If you want to do a gift to help out with the situation they are asking you to cosign or or any other, fine. Done that. But co-signing - all round bad deal for the co - signer.

 

[Rustic23]

NO! If you can't afford to give them the money, don't lend it. It will destroy the relationship if they don't pay it back as agreed. And, yes, I speak from the voice of experience.

 

[Meadbh]

I once lent $1000 to someone who worked for me who was in dire straits because of illness in the family combined with failure of alimony payments to materialize. She had a past history of bankruptcy and I knew there was a significant risk of default. She was under extreme stress, which was affecting her work. I rationalized that addressing the root cause of her stress would improve her performance and give her a "breather" to address the problems. We agreed that the money would be repayable within three months.

She immediately became less stressed and more focused. One month later she repaid the money in full, with interest (which I declined). I was glad to be able to help and pleased with the outcome, but I decided that I would not lend money again. If there was a next time, I would refer her to her bank manager. There was no next time.

 

[Corporateburnout]

For an immediate family member such as brother, sister or my children I would do it with no question asked.

I was asked on multiple occasions for financial aid to a sister and a brother. I gifted the money but they insisted on paying it back every time to the last penny. I know it could ruin a relationship if you loan money to a family member but as others have said if you can afford to gift it you won't be disappointed if you don't get it back.

 

[Ready-4-ER-at-14]

I wonder if the defining thing to the borrower is the interest charged?

In other words if this is a business like loan at high interest and it goes sour, that not paying is justified as you "took advantage of them".
And if it was a gift or a no cost loan they feel a need to do good back to you.

Of course I am talking about an average person, liars lie, cheaters cheat, and mockers mock. Some people have bad habits acquired over a lifetime and you signing one check or opening a wallet or purse won't change that.

When I was making loans on the person to person site some of us did what we called "social loans" a person a long time navy person was dying of cancer and wanted to go to Australia or someplace like that to see family. They were painfully honest about expected life left and the total amount asked was essentially plane fare. Some of us bid on it and I think they made 3 payment.

A couple were out and out scoundrels to whom I must admit duped me successfully, but I still smile remembering the clever way they did it... Pretty cheap life lesson that not all thieves are dumb or unwilling to work for money.

 

[Music Lover]

I need counseling on how to say no.

You can always take the easy way out and tell them that you'd like to help, but "gosh darn it...things are a little tight this month. I'm sure you understand..."

 

[Sunset]

OP - you could probably shut down the asking pretty quick, by simply replying: " Don't you have years worth of savings you could use for this?".

Then wait for them to explain how over all the years they have no savings. . .

Then suggest they get a bank loan.

 

[Scuba]

I would not, and I think my family and friends know this without my saying it. This I've never been asked.

 

[easysurfer]

You can always take the easy way out and tell them that you'd like to help, but "gosh darn it...things are a little tight this month. I'm sure you understand..."

Could also say "now that I'm retired, things are really tight. Not like how things used to be." As an exclamation mark, add "No way do I wish to work again!" .

I've learned from experience. Once you loan money and they are late in repaying and you give a reminder, you end up being treated like the "bad guy or woman" for asking .

 

[pb4uski]

"No, that's what banks are for and I'm not a bank... besides, I value our relationship and would not want to jeopardize it."

That said, I did once lend $3,000 to a life-long friend about 15 years ago so he could rid himself of his gold-digging, cheating wife (a distant cousin of DW ... but DW fully supported making him the loan). In that case I knew I would get paid back and he paid me back within a year. It was the best $3,000 that my friend he ever spent and I am thankful that I was in a position to help him.

 

[Rianne]

I've learned a great deal from your posts. There are swindlers and there are honest needs and especially if children involved. One of the situations I was alluding to...

My DH brother's wife is from Thailand. Came from very poor conditions and her character leans towards servitude. My BIL gradually told the story of her parents in Thailand. Long story short, they live on a farm and their house is decaying from termite infestation. Mind you, BIL takes full advantage of wife's servitude and treats her as such. She is smart and a great cook and takes care of him, better said, obey's him, as though he's a god. He asked us to loan her parents 10K to rebuild their house. We suggested he take care of his wife and family. The request for the money to rebuild is still out there. We like her so much. She came to the U.S. to marry him and is obviously not privy to the American woman's independence and strength.

I think the best solution is to avoid the request. We have never met her parents or been to Thailand. And he is the one who is in debt and is stupid about money. He obviously got what he wanted in a wife. I'll leave it at that. We are compassionate about her parents, if the story is true. That's another "cog in the wheel" we're wondering about.

 

[HadEnuff]

NO! If you can't afford to give them the money, don't lend it. It will destroy the relationship if they don't pay it back as agreed. And, yes, I speak from the voice of experience.

Exactly what I was going to say. In fact I had to take this very approach with my own daughter. I told her there was no such thing as "loaning" her money, since she had no way to repay it. It would be a gift. And since I was in no position at that time to give her all of what she wanted, I could give her some.

I think it really hit home that her own dad would say this to her. She was still quite young, maybe 20, but I think it helped straighten her around a bit with how she handled her finances to hear that her dad knew he'd never get paid back on a loan.

So, "no" to "loaning" money to family members or friends who clearly can't get their acts together financially.

 

[Nemo2]

We are compassionate about her parents, if the story is true. That's another "cog in the wheel" we're wondering about.

Perhaps totally dissimilar, but there was a guy on our Saudi project who [-]apparently thought he[/-] was engaged to a Thai girl he'd met there.....gave her the money to buy her parents a farm, (after already forking out money for their appliances)........seems she subsequently disappeared faster than David Copperfield's Statue of Liberty.

 

[Rianne]

Perhaps totally dissimilar, but there was a guy on our Saudi project who [-]apparently thought he[/-] was engaged to a Thai girl he'd met there.....gave her the money to buy her parents a farm, (after already forking out money for their appliances)........seems she subsequently disappeared faster than David Copperfield's Statue of Liberty.

Interesting, BIL is married to her...but she is now a citizen. Became one less than a year ago. To be continued, she may be way smarter than we think