Do you lend money to relatives/friends?

126coupe · 126coupe's Garage

I usually never lend $ to family or friends, but my wifes sister needs 6K to help her son get out of the Apartment and get his own place. She is willing to pay interest, but has no collateral. Your thoughts, opinions or experiences?

legion · 01-31-2008, 01:47 PM

Sometimes I'm glad that any extra money I have goes right into my 401k.

It makes avoiding these situations easy.

What does your gut tell you? How likely are you to be repaid? Why are you even being asked to become involved in this situation? Isn't this her son's responsibility?

frogger · 01-31-2008, 01:49 PM

In the past, we've lent a good chunk of money to one of my brothers, and to one of my wife's sisters. In the back of our minds, we expected no repayment from either, though that was never mentioned to them. Guess what...we were right.

legion · 01-31-2008, 01:50 PM

Can you afford to write off the $6k?

If the answer is "no", then do not consider loaning the money.

jmz · jmz's Garage

Hi Minkoff,

I think these things are tough calls. I faced a similar situation a couple of years ago. My brother was living way beyond his means and his family of 5 were going to have some troubles paying their property taxes and other bills. He originally came to me with a request of $20,000 and later said he thought $5,000 would get him by. I lost sleep over it for a few days until I finally decided to loan them the money (knowing that may not ever see it again).

I slept well the night I made the decision and he has not paid me back because he really can't.

I guess I am happy I was in a situation to help but all it really did was to postpone the inevitable.

I looked at their finances and gave suggestions on how to scale down and get things back in line but they didn't take my advice at the time.

I think they are now trying a bit harder and I hope they succeed to get their house in order.

I guess my advice would be if your family really needs your help and you are in a position to do so then strongly consider it.

Cheers,
JZ

Oh Haha · 01-31-2008, 01:53 PM

Get it in writing!!

it's never a good idea, IMO, to lend money to family but if you feel it's a good deed or even a necessity, go for it. My Mom needed some $$$ to get through a tough time after my Dad passed. We didn't have the funds available but my sister did. As an executor of Mom's estate, I insisted that it be a loan with interest. Things worked out and she was able to pay back the loan in full to the terms of the agreement. Sorry, but in my world, even Mom doesn't just get a gift of tens of thousands of dollars. My .02, YMMV.

71T Targa · 01-31-2008, 01:54 PM

Quote:

Originally Posted by legion

Can you afford to write off the $6k?

If the answer is "no", then do not consider loaning the money.

And if the answer is "yes", then I'd like to talk to you about a loan.

frogger · 01-31-2008, 01:54 PM

Quote:

Originally Posted by jmz

I guess my advice would be if your family really needs your help and you are in a position to do so then strongly consider it.

Cheers,
JZ

+1. Family's family.

Shaun @ Tru6 · 01-31-2008, 01:54 PM

member tishabet works at a company that specializes in this stuff.

Andras Nagy · 01-31-2008, 01:55 PM

When my kid brother (and I mean 17 years younger) wasn't working between the Holidays, my older brother and I sent him money (over $500 each) to tide him over.

He never said thanks, not even in an e.mail note, and we know that we'll never see that money again.

But he is family, we do love him, so that's the price for being nice to family.

Now, my older brother (just 14 months older) has loaned me money, and I've paid back, ever cent with interest.

These younger kids just don't get it.

Shadetree930 · 01-31-2008, 01:57 PM

I have made two family loans. In the first case I knew I would get it back and I did. In the 2nd case (different family member) I knew I would not get it back and I did not. In the end, family is family and you got to do what you got to do.

126coupe · 126coupe's Garage

Quote:

Originally Posted by legion

Can you afford to write off the $6k?

If the answer is "no", then do not consider loaning the money.

I need to talk to my CPA to see if I can deduct it. I am borrowing the $ on my line of credit, which the interest is deductable.. The LTV on my house is less than 20% so financially I cant be hurt, but i could be hurt emotionally.

Rot 911 · 01-31-2008, 02:03 PM

Quote:

Originally Posted by Minkoff

I need to talk to my CPA to see if I can deduct it. I am borrowing the $ on my line of credit, which the interest is deductable.. The LTV on my house is less than 20% so financially I cant be hurt, but i could be hurt emotionally.

If you have to borrow the money, then don't do it! If you have the money and don't mind losing it, then go ahead.

But more importantly, why does the kid need $6K to move out? Tell him to get a cheap apartment like every other poor person does.

legion · 01-31-2008, 02:04 PM

If you need to borrow to make a loan, then you don't have the money IMO.

legion · 01-31-2008, 02:05 PM

Quote:

Originally Posted by Kurt V

But more importantly, why does the kid need $6K to move out? Tell him to get a cheap apartment like every other poor person does.

That was my question. I don't see why you are even being asked for money in this situation.

stomachmonkey · 01-31-2008, 02:10 PM

It's family.

I do what I can for mine.

Have a friend who is like a brother and is between jobs

he is freelancing but having trouble making it through 30 day receivables. slow paying clients suck.

have made a car and rent payment for him. will be depositing some cash for him tomorrow so he can see the dentist.

stomachmonkey · 01-31-2008, 02:11 PM

Quote:

Originally Posted by Minkoff

I need to talk to my CPA to see if I can deduct it. I am borrowing the $ on my line of credit, which the interest is deductable.. The LTV on my house is less than 20% so financially I cant be hurt, but i could be hurt emotionally.

That's a bad idea.

Only do what you can with what you have on hand.

CurtEgerer · CurtEgerer's Garage

Loaning money and business deals with family and friends? It's a very, very bad idea. This advice has been around for ages, but you always tend to think that it will work out in your own case. It won't. Ask me how I know ....

If you go in with the mindset that you're simply giving them the money as a gift, it will all be good. Then on the odd chance that you actually receive a few payments, it will be a pleasant surprise.

jmz · jmz's Garage

Quote:

Originally Posted by CurtEgerer

Loaning money and business deals with family and friends? It's a very, very bad idea. This advice has been around for ages, but you always tend to think that it will work out in your own case. It won't. Ask me how I know ....

If you go in with the mindset that you're simply giving them the money as a gift, it will all be good. Then on the odd chance that you actually receive a few payments, it will be a pleasant surprise.

Bingo!

Don't loan what you can't afford to not get back.

stomachmonkey · 01-31-2008, 02:25 PM

Quote:

Originally Posted by Minkoff

I usually never lend $ to family or friends, but my wifes sister needs 6K to help her son get out of the Apartment and get his own place. She is willing to pay interest, but has no collateral. Your thoughts, opinions or experiences?

6k to get into an apt.

Assume it's 2 months security and 1st months rent?

Maybe he should be looking at a cheaper place.