What is your view on loaning relatives/friends money?

[thirty-two]

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]

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]

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]

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]

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]

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]

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]

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]

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

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]

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]

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]

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]

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]

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]

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.

 

[KloD]

Never lend, if you want to help... give it to them, if not... don't. If the person has a pattern of getting behind, they will never learn to live under their means if they know they can fall on others. If the person honestly needs help, give them what you can and don't look back.

 

[AZZenny]

It's a gift, not a loan, unless it's big enough to draw up formal loan papers, which you should do. In which case, there better be a damn good reason why they aren't going to a bank for the same loan.

It's a bad idea to loan a friend or family member money thinking this is how they will learn responsibility. And if you know they won't repay it, or they have come to you repeatedly, see #1: It's a gift, and you've been identified as a sucker/soft touch. So if you wouldn't buy them a Christmas gift worth the same amount of dough, probably best to not do it in cash.

That said, people get into terrible situations that were not foreseeable, and I have helped family out in those kinds of unusual cases -- but never with the expectation of seeing the money repaid.

 

[Jersey Girl]

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....

I don't think anyone here is being cold. Kate asked for opinions and, based on our own individual experiences, we've given them to her.

My brother owes my parents, my sister and me thousands of dollars that we will never see. Why? Because he has been enabled for so long and refuses to hold a decent job long enough to see his salary increase at any decent rate. Plus, he lives with a deadbeat girlfriend who doesn't work at all. I don't know how he plans to fund retirement.

He's often short at the end of the month for money for bills, but he does little to fix his financial situation. So, does he "need" the money more than me? Perhaps, but, honestly, it's not my problem. Of course, if needed a kidney or bail money, that would be a different story.

My point is, our personal experiences drive our opinions on this matter. I'm not being cold. I'm just not enabling anymore.

 

[Jersey Girl]

edited

Well, I think that complicates matters. It's hard not to do for someone who has done so much for you, especially if it's someone who hasn't had their hand out on a regular basis.

Good luck, Kate! It's definitely a tough situation.

 

[Heucrazy]

It depends on the person IMO.

I had to pay my car insurance last Thursday but I didn't get payed until Friday. I borrowed the money from my parents and paid them back the next day in full.

My brother had to pay his power bill or else it was going to get shut off. I paided it for him (actually for my Nephews and Niece) and a year later I have gotten back $50 of the $500 I paid. And now I refuse to ever give him money again.

Depends on the person.

 

[MigratingOsprey]

definitely a tough spin - for me it would depend on the situations, but I know if it were my parents the situation would be harder - then again my parents have never asked me for anything and have made great sacrifices to ensure that I have had a good life and good education

when my wife and I first moved out here we made some decent friends - the types that were bad with money and kept having kids - they were in a tight spot (as were we - was definitely a rough first year getting established) - however, they were trying to get into a better situation and needed $500

they promised to pay it back, we figured we'd never see it again - we gave them the loan - they paid back $100 of it fairly quickly - we had them watch our cat for a week as well as we needed to be out of town - my wife then switched jobs and we haven't seen them since - we just consider it an expensive cat sitting and hope that it was used to get them in the right direction

there have been plenty of times we've said no though

it sounds like you are heading in a great direction - i've always been of the mind if you can't help yourself you can't help anyone else - it may be uncomfortable, but a discussion with your mom could be beneficial in an effort to keep her out of this situation ("I can't help you this time, but here is what you can do ........)

With me I'll still want to help family out in a catastrophe/one off type situation - however, if i'm the safety net for all my families and friends then not only do I lower the ability to put myself in a good situation, I severely limit myself to how much I can help when a casatrophe hits.

If I give someone $1,000 because they couldn't resist a new TV and are now in bad shape on their cell phone & cable bills then I no longer have $1,000 to help a family member who is working out of a bad mortgage or had some unforseen medical bills that kept them out of work

 

[Shane]

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....

Its not money its principle. It can be a vicious cycle expecially with family many of whom will end up thinking they are entitled to it.

If you keep bailing people out you become their crutch. Does it suck to see them struggle? Yes. But in the long run they need to lay in the bed they made. Not make you pinch your pennies or do without because they made stupid mistakes.

 

[Shane]

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.

Ok your sisters car broke down and the only reason she cant afford to fix it is because of the weed habit. Now what?

 

[SirStefan32]

Depends on the situation. If somebody's car breaks down and they need money to have it repaired so they can get to work, you have to help.

If they sit on their ass all day instead of working, then you don't.

Each situation is different. Generally, I would say don't loan, but cars break down, divorces happen, people lose jobs- there are definitely situations in which I would definitely help.

It's up to you to determine if she REALLY needs help, or if she's just trying to take the easy way out. Think about it, consider it carefully and do what you KNOW is right.

 

[Zeno]

I gave my f-up older brother $500 to help him get on his feet and a week later he called me and asked for $100 more...I gave in then too. I made it clear it wasn't going to happen again. I then found out my Mom gave him a couple thousand as well.

I would give money to family in need again just not him. He's the most irresponsible 50 yr old I know.