If family members are struggling financially, should you lend them money?
When a friend or a family member asks to borrow money, your first inclination may be to help out. But many people have learned the hard way that friends, family and finances often make a poor mix.
Here's one woman's sad account. Before they got married, her husband's mother died unexpectedly, leaving him a bit of money. About two years later, his oldest brother calls up and asks to borrow 30K to help him and his girlfriend buy a new house.
Husband says OK and withdraws the money, including penalties, from one of the accounts his mom left.
And then things head downhill from there.
Younger brother forgot to report the withdrawal to the tax department, and gets hit with a huge tax bill for about $16,000.
Two years later, after selling their car to pay for their wedding, older brother is finally starting to pay the couple back. But it's only about $200 a month, off and on.
Would they do it again? No way, says long-suffering new wife. What about you?
Under what circumstances would you lend family members a significant amount of money? If you've already done so, how are things working out?
By Gordon Powers, MSN Money
Posted by: SP | Nov 20, 2021 11:14:45 PM
Don't lend to family, give.
If you cannot afford to lose it, don't. When you 'lend' you're just asking for trouble as a failure to pay back when you want will cause hard feelings on both sides and when you're all done you're still 'family' but now with more baggage.
Posted by: Sue | Nov 21, 2021 8:08:14 AM
Sister borrowed quite a chunck of money years ago. Promises, promises in paying it back. Up till now haven't received a cent. Family is devided about it - some feel I should just forget about it. Moral of the story: don't lend money to family/friends/anyone. I ruins relationships.
Posted by: GSJoy | Nov 21, 2021 9:39:49 AM
When one is in a dire situation, promises are made to pay back, but they are only words; when the time comes for repayment, the borrower makes all sorts of excuses. A few years ago, I cashed in some stocks to lend a family member to start up his business; the business has come and gone, and I am still waiting for the money, although I still get promises that it will be paid. I have written this off. I promised that I will never be a lender or borrower. The lending of money is bad business practice and split friends and family apart.
Posted by: never again | Nov 21, 2021 10:19:08 AM
I loaned expecting it back. Now I don't know why I expected it back. If they can't make payments to a financial institution, how are they going to make payments to you? Now, when someone asks to borrow money, I either just give it to them as a present or I tell them to go to a bank. When they say the bank won't loan me money, I say, there's a good reason the bank won't loan to you. You are high risk. How are you going to be lower risk to me? I have not gotten a good answer out of that.
Posted by: Frank | Nov 21, 2021 4:34:39 PM
The only thing people understand is the loss of their credit rating. Don't lend friends and family money unless you fully expect never to see it again. I have done it 2 or 3 times and every time it has gone sour. For some strange reason friends and family figure you don't really need the money if you have it hanging around and that as time passes you will forget or the loan will magically change into a gift. I have heard variations of this and all the above stories over and over again. Sadly the vast majority of people have no idea how to manage their money.
Posted by: karra | Nov 22, 2021 11:43:01 AM
My son borrowed a chunk of money when he ran into debt and was clinically depressed. Lending may have averted a potential suicide. It lifted a load of his mind immediately, and he started getting medical help. Then he started living within his means ($1200 or less per month!) and paying off bits every month. When tax return time came, he gave it all to me. I was so impressed. I explained that any money he paid back to me would be available for future loans, but no more would be loaned. Not had any problems since. He even got a better job, although still low income and renting a cheap and not very nice apartment with a couple of other young guys. He has very little left on the loan and a cushion built up from the repaid amount.
Funny thing is when we paid off and he tore up his credit card, the bank immediately sent him a new upgraded card with a higher limit, as a good customer! He appreciates the irony, and is not being suckered in again. Had to post this when I saw the negative comments.
Posted by: Robin | Nov 23, 2021 7:41:42 AM
The reality is that if people get into trouble with money because they don't know how to save, then it's never a good idea to lend money. If the person can't afford to buy that house or car, then they should learn to save it.
However, if the family member has been or is ill (be it physically or mentally), then it's a different story because likely they will use the money to pay rent or buy food as opposed to just "stuff".