Advice on lending to family?

[texmati]

I don't want to get into many details... but we've been asked for money to help tide over a 'business miscalculation'. We have the amount in the bank, and we could afford to be without it for the 6 months we've been told.

However... I'm very weary. These are my inlaws, and I don't know them well. These people did help DH's father out in the past, and he feels he owes them.

Any advice?

[lolar2]

Give money, don't lend it. Unless this is a relative you really, really dislike-- lending someone money is a good way to avoid ever seeing that person again. You won't see the money again either, but maybe it's worth the price to avoid him or her. But if it's someone you want to maintain a relationship with, you should make it a gift. I used to think people who said what I'm saying were speaking tongue-in-cheek, but from subsequent experience, I'm quite serious.

[yeahwhat]

I'm in total agreement with lolar2. Never lend to relatives or friends. Don't give it if it isn't a gift.

[Sarah W]

Don't do it. That's my best advice.

You said you can do without it for 6 months...if you can't do without it forever, you can't lend it.

[texmati]

ok... I think we will end up gifting another amount... I feel horrible, DH said that he was desperate. On one hand I feel like if he's desperate, shouldn't we offer up, and on the other hand, if he's desperate, what are teh chances we'll get paid back.

He also said he's already asked everyone he knows... which makes me feel like we are the last people he'll pay back.

Growing up, my family never, ever, ever talked about money, so it's difficult to know how to act in these situations.

[annethcz]

I think that giving a smaller amount is a much better idea than lending a large amount.

It's so hard to know how to deal with these situations.

[zebra15]

If its a 'loan' then write up loan papers about how much is being borrowed the terms the payment dates etc. If its a gift... kiss it good bye...(but you may be able to claim it on next years taxes)

[WorldsBestMom]

Nothing is wrong with lending to family or friends. That is how many successful business started out in the first place. The problem is, how honest is that family or friend who promised to repay you. If your not comfortable lending, go with your gut feelings.Instead give them half of the amount they wanted to borrow, therefore they can seek the other half else where.

[lolar2]

Originally Posted by WorldsBestMom

Nothing is wrong with lending to family or friends. That is how many successful business started out in the first place. The problem is, how honest is that family or friend who promised to repay you. If your not comfortable lending, go with your gut feelings.Instead give them half of the amount they wanted to borrow, therefore they can seek the other half else where.

It's not just honesty, it's also capability and luck. Even people with good intentions don't always manage to pay back what they owe.

[cappuccinosmom]

Yeah, either give it or don't expect it back (or all of it back).

Unless you're willing to write up legal loan papers and go to court for the return of the loan.

or

Unless this person is the most honest, faithful, trustworthy person you know and would work 16 hour days cleaning toilets for 10 years to pay you back.


That's why my father was willing to loan dh some money. But we still drew up loan papers.

[Belia]

I agree with the PPs that you should not LOAN anybody money, friends or family. You should give money as a gift (if you are able to do so both financially and spiritually) with no expectation of return.

[Ola_]

We have loaned friends and family money, but they were not amounts that would break us if they didn't repay, and we were quite certain these individuals would pay us back no matter what (and so far we've not been proven wrong).

With what you've said so far, though I don't know anything about your relationship and their money management history, I'd lean towards not lending. Sorry.

[cristeen]

If it's a loan, go to virginmoney and get the paperwork on it. If it's a gift, make it a gift. Do not do a loan without the paperwork to back it up. At the very least, it gives you a tax write-off if you don't get paid back.

[Amys1st]

Advice on lending to family?


Dont do it. At all.

IF you have the money and don't mind ever seeing it again, call it a gift. I agree w a pp, if you want that person to go away forever, call it a loan but in your mind understand that money is gone forever.

[texmati]

Well... against all advice... we're doing it. . I was able to get dh to agree to a slightly smaller amount, but it's still 10% of our gross income in a year.

Just thinking about it is making me angry right now.

[cristeen]

Originally Posted by texmati

Well... against all advice... we're doing it. . I was able to get dh to agree to a slightly smaller amount, but it's still 10% of our gross income in a year.

I will repeat myself... go to virginmoney.com and make them sign the paperwork. With a failing business in this economy, the chances of you seeing that money again is slim. This way at least you'll be able to take a write-off on your taxes. Without the paperwork on the loan, you're out of luck.

But truth be told, I'd do the paperwork even if the chances weren't slim. It protects you and puts every last detail into writing so there's no confusion amongst you.