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Have you ever successfully loaned money to a family member? How?


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By "successful" I mean...did they actually pay you back!?

 

Dh and I have been generous in loaning money to members of his family.

 

The first time was a verbal agreement. Eight years ago. Apparently the family member has absolutely no memory of this as he has never paid the money back. Dh wouldn't bring it up back then, then the person in question (his father) lost his job and of course we couldn't ask for loan repayment from someone who was unemployed...then he got a job...then he lost his job...then he got a job...and so on. Figure that money is gone.

 

The second time was a written contract. Eighteen months ago. It was supposed to be paid in full this month with repayment starting 15 months ago. When we were three months into the repayment period, we asked where the money was. That's when we found out the person (brother this time) wasn't graduating in December after all and wouldn't be able to start paying until after graduation. However, that was now nine months ago and still no money. I emailed him last week, quoting the written agreement (which HE wrote, by the way), and of course haven't heard from him.

 

Now another brother is in a bind. Wants to borrow a significant amount of money (double what the first two combined borrowed). Says he can pay it back as soon as he gets his bonus (which comes annually between the first of the year and tax time).

 

How can we successfully (as in, ever see our money again) loan to a family member?

 

Or can it just simply NOT be done? I know everyone warns against it...it just seems like it SHOULD be possible. The first two times we kind of said, "Well, if they never pay us back we can do without it...so if we're okay with that then we can do the loan." Yes, we can live (and ARE living) without that money, but...

 

This time we do need the money back.

 

Have you had successful lending experience(s) with family members? Please advise. TIA

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You just say, "Gosh, we wish we could, but we just are too cash strapped, right now." If we hear of any odd jobs you might be interested in, we'll be sure and give them your number..... Gosh....(whatever your husband's name is) could really use some, too. So, if you hear of any..maybe you can think of us.

It's not a lie. Do you have years of money saved? As the TV judge says, "So, did you think about this before you loaned this money...that you're giving to someone else...$$$ that you could be giving to your kids?"

Carrie:-) You can do it...just say "NO"

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I consider all loans to friends and family to be gifts. We don't always say yes, but if/when we do, we know they might not pay us back. I would be grateful if they pay me back but if not, I expected that they would not.

 

I learned this from my father who ended up in conflict with his brother over a car loan - his brother took the car but never paid, then a similar situation with my father and my Godfather. My father borrowed money and then lost his job can could not come up with the $700 he owed. We stopped seeing them. We no longer visited with them for holidays. I missed them!

 

Unfortunately I do remember them, so when I loaned a friend $400 plus bought her $1000 in stuff for her kids and she said she would pay me back, I remember when I talk to her. I wish I didn't because at the time she needed it much more than we did. The $$ was tuition for school and she graduated 2 years ago. Even now she and her dh struggle because of child support, etc. He pays his ex but her ex never pays. I don't need the money, I think I have forgiven the debt, but I just wish I could forget about it! Maybe I need to tell her it's forgiven but I'm afraid if I bring it up she will think I need her to pay!

 

That being said, I did have one person (a cousin) who was barely making above minimum wage pay me back $300 over a year or two, maybe even more. Each month she would send $25 or $50 - whatever she had. Some months nothing but in the end she paid me back. She wasn't born in the US, in fact she moved here from Cuba in the mid 90s, so it may be that she just has a different mindset about money.

 

My dh and I paid my mother back, $5000 over 6 months. We borrowed that to close on our house with 20% down. We prioritized paying her back over everything else. Prior to that we had been debt free for 3 years, again, a different mindset since being debt free (except our mortgage) was our goal.

 

Most people in this country are in some type of debt. They probably feel they cannot pay you back most likely because their money and their month do not match. That's why so many mention Dave Ramsey or Crown Financial or other programs (can someone name a secular one?) that helps people get back on track.

 

If the same people are running to you for loans repeatedly, it is likely that they are not managing their money well at all and you will not see that money ever.

 

I did send a Dave Ramsey book to someone last year when her dh moved out, quit paying anything and she was in over her head. We also gave her gift certificates to Winn Dixie to cover her food for a month. We consider the gift cards gifts and not loans.

Edited by girligirlmom
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A: We never loan money we need. Our first financial responsibility is to our own family (us and our children). When that is adequately taken care of, we can (and do) reach out to others around us who are struggling. You can't save someone who's drowning if you're going under too.

 

B: When loaning money to family we always consider it a gift, even if a "loan" is what was discussed. If it's not paid back, we were glad to help where needed. If it does get repaid, then it's a happy surprise. This way we can be happy about it either way. It saves our sanity and our family relationships.

 

C: Repeat after me: "We're so sorry, we'd love to help out if we could, but we're just not able to at this time. We love you and will support you in any other way we can. Good luck!"

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Well, obviously your DH's family remembers enough that the word has spread that you loan without requiring repayment. There's an ugly pattern building there.

 

We have never successfully loaned money, although we once successfully borrowed and repaid it. We made it our top priority and paid it back in less than half of the projected time. And then we "got in trouble" because the lender didn't get all of the interest he was expecting!!! Ummm. We won't do that again. Ever.

 

I would say at this point that it wouldn't be wise for you guys to stick your necks out again, especially for such a large amount.

 

I think money and family should be separate pots.

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I have loaned a significant amount of money to my sister and the way I handled it was using a cc to cary the balance. She makes payments to the cc, via me. That way she pays the interest to the bank and I have a detailed record (no cash payments) of the beginning and ending balance. We set the payment $100 higher than the lowest required payment to account for variances in the interest rate. The loan was for 6 mths.

 

We built in a few fails safes. If we ever wanted out of the situation she would 1. refinance her house 2. transfer it to a personal loan of her own 3. repay me no matter what when she sold her personal side business.

 

She was supposed to pay it off 3 years ago, but lost her main job quite unexpectedly a few months into it. She was going to refinance her house, if we ever wanted to cancel the loan, but she had lost her job and the market tanked. She said that she would get a loan to repay the loan, whenever we wanted the money back, but then her son lost his job that was paying for his college, so they had to come up with tuition in a hurry and she had to buy her dd a car. She sold her business, then the person went default on the business and she lost the revenue ....

 

She is still making payments and they are pretty much on time. We pay the payment ourselves so it always gets to the bank on time, then she pays me. There are about 5 years of payments left at her current loan rate! BLAHHHHHH.

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This time we do need the money back.

 

Then you can't afford to loan the money. Period.

 

Even if you could, repayments that rely on bonuses always make me wary. First off, bonuses often aren't guarenteed and a lot of people are losing them in this economy. Second, it means he has no other plan and a repayment schedule hasn't entered his thinking. He's just counting on the big payoff. Not the mindset of someone safe to lend to.

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well, I see it a couple ways.

 

First, I think the best way to do it is to expect that it's a gift and be happy if repayment happens. Even if you write up an agreement, I think you have to assume that money is gone. And really, are you going to take family to court for a few hundred dollars?

 

Generally, I think loaning money is a bad idea. It enables people in ways that hurt them. Once in a blue moon, that isn't the case, but....

 

HOWEVER (hypocritical?), we pretty regularly borrow money from my mother. She paid my daughter's tuition earlier this month so I'm sending her a check today. She sent a mortgage payment for us several months ago, we paid it back when we got a lump sum of money. We always pay it back when we say we will and she never gives us more (nor do we ask) when we have a balance with her.

 

But it is still a bad idea. Really, if we planned ahead, had emergency funds, etc, we wouldn't have this issue.

 

This is going to be handled soon. We're expecting 3 lump sums in the next couple months. We're sending it to my mom to hold for us as my hubby loses his job. In June, we'll then send most of the money he gets for severance and pension and 401K and such. Then we will just be getting our own money from my mom (we do have a 10% savings acct started here also for more minor issues).

 

We'll be LIVING off of unemployment and my income. But hopefully he gets a job soon. Then we have our emergency funds for later.

 

For us, we're just not responsible enough to do it by ourselves and we know it. So we're getting my mom's help in a healthier way instead of relying on her and her money when things go wrong.

 

Anyway, my mom and I never have a written agreement. I try to pay her back in the same month generally and especially if she's used her credit card (she doesn't carry a balance).

 

SO it CAN work out. I guess I just don't think you should bank on it.

Edited by 2J5M9K
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The answer is simple: never lend money. Not to anyone. Never, ever to family. I agree with the other poster who said that word is out in your family that you are an easy place to get money.

 

Just say no, you have none to lend. Stick to your story the rest of your life.

 

Ria

Edited by Ria
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By "successful" I mean...did they actually pay you back!?

 

Dh and I have been generous in loaning money to members of his family.

 

The first time was a verbal agreement. Eight years ago. Apparently the family member has absolutely no memory of this as he has never paid the money back. Dh wouldn't bring it up back then, then the person in question (his father) lost his job and of course we couldn't ask for loan repayment from someone who was unemployed...then he got a job...then he lost his job...then he got a job...and so on. Figure that money is gone.

 

The second time was a written contract. Eighteen months ago. It was supposed to be paid in full this month with repayment starting 15 months ago. When we were three months into the repayment period, we asked where the money was. That's when we found out the person (brother this time) wasn't graduating in December after all and wouldn't be able to start paying until after graduation. However, that was now nine months ago and still no money. I emailed him last week, quoting the written agreement (which HE wrote, by the way), and of course haven't heard from him.

 

Now another brother is in a bind. Wants to borrow a significant amount of money (double what the first two combined borrowed). Says he can pay it back as soon as he gets his bonus (which comes annually between the first of the year and tax time).

 

How can we successfully (as in, ever see our money again) loan to a family member?

 

Or can it just simply NOT be done? I know everyone warns against it...it just seems like it SHOULD be possible. The first two times we kind of said, "Well, if they never pay us back we can do without it...so if we're okay with that then we can do the loan." Yes, we can live (and ARE living) without that money, but...

 

This time we do need the money back.

 

Have you had successful lending experience(s) with family members? Please advise. TIA

NO WAY would I lend money to family, especially with the track record you have going it's not a good idea.

 

I think that a simple, "Sorry bro, tough times for all of us this economy. We just don't have money to lend out any more."

 

Tough love, that's why there are banks.

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Then you can't afford to loan the money. Period.

 

Even if you could, repayments that rely on bonuses always make me wary. First off, bonuses often aren't guarenteed and a lot of people are losing them in this economy. Second, it means he has no other plan and a repayment schedule hasn't entered his thinking. He's just counting on the big payoff. Not the mindset of someone safe to lend to.

if the bonus is anticipated then it's not like he won't get the money --just delayed gratification.

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Now another brother is in a bind. Wants to borrow a significant amount of money (double what the first two combined borrowed). Says he can pay it back as soon as he gets his bonus (which comes annually between the first of the year and tax time).

 

Is there any way he can make arrangements with whoever he needs to to just wait for his bonus?

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Just to show the flip side:

 

In 1984, I graduated college and bought a 1977 Mazda GLC thanks to my older sister's loan. I repaid the loan over 18 months at $200 per month (if my memory is accurate, which often it is not) faithfully. We had a written agreenment. I think this sister has loaned to other family members, but it was long ago (early adult lives). I guess my family tends to have many financially (and otherwise) responsible individuals.

 

Sounds like your dh's family are missing the 'responsible' gene.

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Normally, and especially with the experience you've had with loaning money, I feel loaning money is asking for hard feelings. However, I would never hesitate to loan money to any of my dh's siblings if they needed it. Perhaps they're an unique family, but I have no doubts whatsoever about their integrity and responsibility. They would pay it back! This has been proven over and over. (My in-laws must have done a great job in this area).

 

But it would be over my dead body before I would loan money to my sister....

 

Janet

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I have lent money to a neighbor, a friend and relatives. Only the friend has paid me back. I would not lend money unless you do consider it a gift. I don’t think I’d ever ask a friend, neighbor or relative for a loan, no matter how much I needed it.

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FIL loaned us $10,000 in 1995. We had some business debt that could have caused us to file bankruptcy. It was against everything we believed. So we signed a legal document and agreed to pay the full amount plus 5% interest, using a payment plan over 10 years. It was most generous.

We paid the remainder in 1999 (5 yrs). We sacrificed everything in order to show our gratitude and repay our debt. FIL also lent money to my SIL (his DD) with the same terms. They also paid it in full within five years.

 

While not all family loans are successful, there are some instances which are honored. And appreciated :)

 

Good luck with whatever you decide.

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from my parents when we had just gotten married. It tooks us a few years but we paid them back..it basically ate us alive knowing we owed them!

 

Ds has borrowed a little money from Grandparents. He also owes us a little. He knows in his heart that he has to pay it back..he talks about it all the time. Telling me that he wants to get his debts paid as soon as possible.

 

I said all that to say this..if you know this person and know they will pay you back, then yes I would loan them the money. If you know you are not going to get it back then NO.

I would loan my family money in a heart beat, as I know it would be paid back if I told them it had to be.

 

I do try to teach my dc that if they borrow something anything, then it needs to be paid back.

 

If I borrow an egg from my neighbor...I will buy them a dozen, just because I put them out..it might have been their last egg.

I do not feel comfortable borrowing something and not paying back.

 

I would also get it in writing, even though it is a family member!

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We loaned money to my brother when he lost a job in a recession. We felt blessed that my dh has a recession proof job. It was not money we needed, it was from a mutual fund that we would later use to buy a house. It took him some time to pay us back but he did. We would not have sued. But then we knew that the only reason he was having problems was due to the then ecomonic situation. He found a job and paid us back within three years. We will be willing to do this again if needed during this recession.

 

I would not lend money to anyone with me needed the money in the future. The only money I would lend is investments or discretaniory spending. No money that I knew I would need in the future.

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Guest janainaz

Like most everyone else said, we don't loan it - we give it and only if we can. Only lately have we even been in the position to give like that - typically we are strapped from check-to-check.

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No. Not ever. But, I either gift it or take in trade. For instance, several years ago I made 3 car payments for my brother who was in trouble. He's a painter by trade so he painted most of the rooms in my house as a trade. This works better than lending my, IMO. But it still boils down to the same thing. Getting the debtor to follow through.

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Many many moons ago, I was the one in the family with money and my parents were not. I loaned my mom enough money to cover a month's worth of the household expenses. I was fully prepared to not get paid back, but was repaid every penny.

 

I would never lend money I could not afford to lose. I would also never loan money twice to anyone that failed to repay me if repayment was agreed to.

 

Right now I just wish I was in the position to loan someone money.

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