What is your view on loaning relatives/friends money?

thirty-two · February 27th, 2008, 09:06 PM

The reason I ask is that a close family member is in too deep, and I am debating whether I should help.

Things to consider: This person seems to always get in too deep every few years. I've loaned this person money in the past. This person doesn't always pay the full amount back in the time promised, but will do what she can. This person IS family. I am doing AWESOME in my plan to reduce my debt. I do have a 2nd income which is going towards my debt, but could be used to help out this person.

I just have a hard time saying no and would feel guilty for not helping. But then again, it's not my problem to worry about and she shouldn't have put me in the situation she did.

Anyway, any advice would be appreciated or maybe if you have stories of when you've loaned money or even was the one receiving the money.

jw7 · February 27th, 2008, 09:37 PM

I have tons of stories like this. In fact, even today.

This is my personal opinion.

1) Never "loan" money to family or friends you want to keep a relationship with. If you want to help them, consider it a "gift", if they pay you back, then bonus, but asking/pressuring them to pay you back will strain the relationship/friendship.

2) You will learn a lot about your family/friends if you do do this.

On the one hand, I have a former roommate that ran into sudden hard times (IRS - related combined with a sudden car breakdown) and after consistently paying his share for a few months couldn't do it. So I floated him the rent. Danged if he did not pick up extra shifts and pay be back the full amount within a week without spending money on anything else.

On the other hand, there are people that will ask for help, and if you give them a loan, err... I mean gift, they will forget you ever did that and continue spending money on things (e.g. going to bars or dinner or buying cool gadgets) more important to them than paying you back.

IMO, avoid loans unless you really know the person's past behavior of responsibility. Best not to get into it in the first place unless you feel compelled enough to make it a gift, then consider the money gone.

Chaz · February 27th, 2008, 09:52 PM

Think about what is going to help your family member the most.
Maybe you should give them Dave Ramsey's book?

I can understand your desire to help out but remember you still have your own hole to dig out of.

Jersey Girl · February 27th, 2008, 09:57 PM

My mom always said don't lend out anything that you want to see again. Sometimes it's made me unpopular, but, after getting burned numerous times, I finally subscribe to that theory.

Gaddabout · February 27th, 2008, 10:13 PM

We gifted some friends with $200 we didn't have to my wife's friends. These are the same people I begged not to move here without a job, then moved on a whim in the middle of the night and bagged on me for "exaggerating how good it is to live in Arizona." They moved here at the end of June and by the end of July were going through their sofa cushions looking for money to pay their electric bill.

I told my wife to forget about the money when we gave it to them, but when the friendship soured all my wife could think about was the $200. That buried the friendship for a long time.

No sweat off my back. I didn't really like them. I married into that friendship. Not real big with the monster-trucks-and-football crowd anyway. Just feel bad for my wife, who can't go a week without turning her stomach inside out about that $200 that, of course, we could always put to use in our own tight budget.

If you're the type of person who can give without any emotional strain at all, follow your heart. If you're the type of person that finds it difficult to resist getting your pound of flesh, or have a hard time feeling like everyone's out to screw you over, send them on to the next relative.

In general, adults who make a reasonable wage and get into financial trouble more than once (assuming we're not talking about a medical situation) will always be a little flaky when it comes to paying money back. I say that as someone who has made more than one begging trip to the parents to plea for my continued quality of life.

HeavyB3 · February 27th, 2008, 10:31 PM

Loan your mom the money kate. It sucks, but you helped her in the past and should continue to do so. I'm drunk right now, but tell the lovely Shannon I said hi.

Shane · February 27th, 2008, 11:54 PM

I have never loaned my family money. Mainly because of the reasons jw7 mentioned. Might as well consider it a gift.

People dont learn if they dont have to deal with the heartache and dificult times themselves and figure there own way out of their mess. They feel like "oh they we will be there for me to bail me out so why not"

LVG · February 28th, 2008, 01:07 AM

Quote:

Originally Posted by jw7

I have tons of stories like this. In fact, even today.

This is my personal opinion.

1) Never "loan" money to family or friends you want to keep a relationship with. If you want to help them, consider it a "gift", if they pay you back, then bonus, but asking/pressuring them to pay you back will strain the relationship/friendship.

Make it clear that it's a gift, not a loan (assuming it's a low amount of money), give it, and don't bring it up again.

Brian in Mesa · February 28th, 2008, 02:01 AM

Dave Ramsey pretty much echoes what several here have already said...

Quote:

So the old joke goes: if you lend your brother-in-law $50 and he never talks to you again, was it worth the investment?

The joke may be funny, but experiencing this in real life is anything but funny. Loaning money to a friend or family member is a bad decision.

Someone who lends money to a loved one has their heart - not their head - in the right place. It is okay to give money, but loaning money to someone with whom you have a relationship will lead to broken hearts and broken wallets. Check out the statistics from a recent money etiquette survey:

57% of people said they have seen a friendship or relationship ruined because one person didn't pay back the other.
Almost 50% have loaned $100 or more to help out someone, but 55% don't get repaid.
71% lend money to immediate family members, 57% to relatives, and 54% to friends.

One fact not quoted in the survey is that Thanksgiving dinner tastes 100% better when friends or relatives don't owe one another money! Eating with your master is different than eating with your family.

Even some members of MyTotalMoneyMakeover.com feel the pinch. In a recent poll, 51% said they have loaned and never been repaid, 6% said they're in the situation right now, and the remaining 43% don't loan money in the first place.

Loaning money makes relationships awkward. Parents who lend their newly married daughter and her husband a down payment for a house think they are helping out the new family. Soon, however, they are giving the young couple disapproving looks when an upcoming vacation becomes more important than repaying the loan. This leads to nothing but resentment and pain on both sides.

Don't do this to people and relationships that means something to you. If someone is in genuine need, it's great to help. If you help with money, make it a gift instead of a loan. By not having an IOU having over your head, you will keep your relationships strong.

-Dave Ramsey

RugbyMuffin · February 28th, 2008, 02:54 AM

Quote:

Originally Posted by Jersey Girl

My mom always said don't lend out anything that you want to see again. Sometimes it's made me unpopular, but, after getting burned numerous times, I finally subscribe to that theory.

Yep.

It sucks but I don't lend out money to anyone, ever.

Jersey Girl · February 28th, 2008, 05:00 AM

And, Kate, the reason you have a second income and are doing so well is because you are putting forth a great effort. Don't let someone else see that as their opportunity to take advantage of it. You're not working two jobs to support other people; you are working two jobs to improve your own personal situation.

dreamcastrocks · February 28th, 2008, 05:07 AM

Pretty cold responses here.

I'm not saying give in, but if a family member "needed" the money more than I did, I'd give it to them. Money is so insignificant in the grand scheme of things....

nathan · February 28th, 2008, 05:30 AM

Quote:

Originally Posted by dreamcastrocks

Pretty cold responses here.

I'm not saying give in, but if a family member "needed" the money more than I did, I'd give it to them. Money is so insignificant in the grand scheme of things....

Yeah, but if you're just giving more oxygen to a fire that's out of control, you're not doing anyone any favors.

dreamcastrocks · February 28th, 2008, 05:33 AM

Quote:

Originally Posted by nathan

Yeah, but if you're just giving more oxygen to a fire that's out of control, you're not doing anyone any favors.

True, but that's why I said "need." I'm not going to give my brother money so that he can buy some weed. But if my sister's car breaks down, and I have the money to help, I will. It's what families should do.

Linderbee · February 28th, 2008, 05:45 AM

Quote:

Originally Posted by dreamcastrocks

Pretty cold responses here.

I'm not saying give in, but if a family member "needed" the money more than I did, I'd give it to them. Money is so insignificant in the grand scheme of things....

Sadly, I've never been the one to be in the position of helping, only receiving.

I still owe Harley & NSD a ton of money, which I haven't forgotten (HR may have...don't know if NSD has). It's top of my list of debts to pay.

If/WHEN I am in the position to actually HAVE money to lend...if my family /close friends need it, it's theirs.