Have you loaned a friend money?

[haha]

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

 

[freebird5825]

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.

 

[calmloki]

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

 

[Khan]

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.

 

[kumquat]

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.

 

[SecondCor521]

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.

2Cor521

 

[Martha]

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.

 

[clifp]

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!

 

[haha]

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

 

[Mill]

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!

 

[clifp]

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.

 

[ERD50]

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

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!

-ERD50

 

[Notmuchlonger]

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.

 

[calmloki]

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.

 

[Nords]

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.

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.

 

[Notmuchlonger]

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.

Ya. I feel more comfortable gifting if they really need it.

 

[clifp]

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!

-ERD50

Well we/they weren't stupid about it. Payments were automatically deducted from checking account once a month, and if you didn't have money in the checking account, you get hit with fee from both Prosper and your bank. So the only way to to stop making payments was to close your checking account.

The Experian data predicted that about 10% of my loans would default. Actually two of my good loans were at some of the highest interest rates 29% (the max allowed) and 27% which they have been paying for almost 3 years.

I went back and doubled checked my figures and misread some info. To my shock my investment in Prosper is better than the markets

Total Deposit $2,500
Withdrawals $2,147

Current loan balance $218

Total loans 37
Paid 13
defaulted 13
Active loans 11
current 6
late 5

So given past history I'll probably collect $.10 on the dollar for the late loans and if folks have been paying for 2.5 years will continue to pay. So I may end up getting all but $200 or $250 back. Beats the S&P which was right about 1300-1400 when I was making the loans.

 

[gryffindor]

I loaned my brother in law $5000 to help him buy a wedding ring.

Then a few years later, I start to hear from him and his wife an ongoing story about how we shouldn't ask for the money back and that my wife and I should have directly given them even more money to pay for medical school. Because they are in a relatively harder position than us

I wrote it off and learned that as a lesson never to loan money to friends or family. Keep the 2 separate.

 

[Maurice]

Not to hijack the thread, but who would go into debt to buy a wedding ring? My god.

 

[ziggy29]

Not to hijack the thread, but who would go into debt to buy a wedding ring? My god.

A LOT of people do, especially the ones that drink the "2-3 months salary" Kool-Aid. How many people in their 20s, for example, even HAVE 2-3 months salary saved up? And if they do, shouldn't they either be saving it in an emergency fund or setting it aside as a down payment on a home (assuming they don't prefer to rent)? And if you're planning on kids, you'd have reason to hold on to the cash even more.

The ring I bought my wife was based on her comments but my selection. She told me her ring size and that she wanted a heart-shaped diamond. The rest, including the size, was up to me. I wound up finding something in about 0.6 carats for a solitaire engagement ring. The cost? About three weeks of my then-current take home pay. And she loved it (and does to this day) -- she's never been one for big, flashy or gaudy jewelry (she usually wears stud earrings, for example) and she says she'd be afraid of wearing anything much larger, both in terms of losing the stone or attracting the criminal element.

 

[davemartin88]

My brother needed to borrow about $5K to help cover some medical expenses for his wife who eventually died of cancer- he paid me back when he received the life insurance payment. I had written the money off and was surprised when I got the check- I also didn't have a problem with writing it off because of the circumstances. This isn't the first time I've loaned money to family and so far, it's always been paid back.