The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ichangedmyname on February 09, 2014, 11:50:52 AM

Title: Letting family borrow money?
Post by: ichangedmyname on February 09, 2014, 11:50:52 AM
I got a message from my younger brother. He wants to borrow money I think he's gonna use it to buy his girlfriend a Macbook Air.

I don't want to. It's not like he's gonna get kicked out for not paying rent or he can't buy food.

What would the situation be for you to lend money to family? It makes me uncomfortable.
Title: Re: Letting family borrow money?
Post by: EK on February 09, 2014, 11:55:31 AM
Under exceptional circumstances I would help my sibling with money if she really needed it, but I would only do it as a gift and only if 1) she was truly desperate and 2) I had reason to believe the desperate circumstance was a one-time deal.  I would never lend her money to buy an extravagant gift for her SO and I would strongly discourage her from spending her money that way.
Title: Re: Letting family borrow money?
Post by: Joel on February 09, 2014, 12:03:09 PM
I refuse to lend money to friends or family. It never ends good. Someone always ends up upset.
Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 09, 2014, 12:05:24 PM
How would you refuse? I'm trying to think of words that would not offend him but kind of giving him a tiny face punch. Like really? So your girlfriend can have a gadget?
Title: Re: Letting family borrow money?
Post by: Paul der Krake on February 09, 2014, 12:13:26 PM
How would you refuse? I'm trying to think of words that would not offend him but kind of giving him a tiny face punch. Like really? So your girlfriend can have a gadget?
How old is the brother and how close are you?

Sugarcoating just makes things worse, IMHO.
Title: Re: Letting family borrow money?
Post by: Self-employed-swami on February 09, 2014, 12:15:34 PM
How about "no"?

No is a full sentence, and you shouldn't feel obligated to defend your answer.
Title: Re: Letting family borrow money?
Post by: Tyler on February 09, 2014, 12:16:45 PM
He's asking for you to buy his girlfriend a computer? 

Think about that for a moment.  It's a totally frivolous purchase.  She can't afford it.  He can't afford it.  Nothing is going to change soon to where he'd suddenly have the money to pay you back, or else he'd just wait (or put it on a credit card) and get it without involving you.  This is a good opportunity to establish healthy boundaries by saying no.

How would you refuse? I'm trying to think of words that would not offend him but kind of giving him a tiny face punch. Like really? So your girlfriend can have a gadget?

Perhaps you can say you don't have the money to give him because you're saving up for a purchase of your own.  If he's smart he'll apply that thinking to his own situation.  But if he won't let it go, you may have to simply say no and let him be upset for a while.

Title: Re: Letting family borrow money?
Post by: stevesteve on February 09, 2014, 12:22:11 PM
How would you refuse? I'm trying to think of words that would not offend him but kind of giving him a tiny face punch. Like really? So your girlfriend can have a gadget?

Why would you facepunch him?  He hasn't asked for that.  Just say no, sorry.  Keep it short and simple.  If he asks then that's when you can say something like "I have financial goals I am trying to meet and paying for your girlfriend's computer is not part of that."  Only be rude if he is pushy.  In the end it's your money and I think most people inherently realize that it's not your obligation to lend/give it to them.  Hopefully it will end with a simple "no, sorry".
Title: Re: Letting family borrow money?
Post by: SwordGuy on February 09, 2014, 12:49:33 PM
How about "no"?

No is a full sentence, and you shouldn't feel obligated to defend your answer.

^ This.  In spades!

Title: Re: Letting family borrow money?
Post by: iris lily on February 09, 2014, 01:10:45 PM
I would lend my family money in the same way that DH used to lend his family money, and they him, back and forth, with a written agreement and a stated level of interest owed.

 His family had a farm and he sometimes had cash when they didn't so it worked well. Then, conversely, he was buying rental properties at times when they had money and he did not. They were always good for the loan. He was always good for the loan.  The interest money stays in the family, win win.

Not surprisingly with this rational approach to money, his family has it, he's got it, all are Mustacheans.

OP, your situation doesn't come near this and so no, I would not loan money.

Title: Re: Letting family borrow money?
Post by: Frankies Girl on February 09, 2014, 01:30:40 PM
How about "no"?

No is a full sentence, and you shouldn't feel obligated to defend your answer.

^this

Or if you absolutely have to provide some sort of explanation, how about "No I can't do that. I don't loan money to family or friends." or "No, I don't have the money to loan."
Title: Re: Letting family borrow money?
Post by: Villanelle on February 09, 2014, 01:38:20 PM
Not something I'd even consider. 

"Sorry dude.  Unfortunately, that's not something I can do."  If he presses, "All my money is accounted for and I don't have any extra to give out."

I have borrowed money from family.  With an agreed upon interest rate and a lien on my house, in a mutually beneficial arrangement (lower interest rate for me than I could get for the bank on a non-owner occupied property re-fi, and a guaranteed rate of return higher than they could get in a CD).  And not to afford something I couldn't otherwise buy.

In general, I think it's a horrible idea because most people are asking to borrow for stuff they couldn't otherwise afford.  Which tells you their finances are troubled, and that they make bad financial decisions. That's not promising when *your* money is on the line.  Even if you have his sign something, are you actually willing to take him to court to get the money back?  Probably not. 
Title: Re: Letting family borrow money?
Post by: Argyle on February 09, 2014, 01:43:16 PM
If he's pushy, you could always say, "I don't have the money to loan.  But if you'd lend me the money, I could loan it to you."  :)

I'm worried that this isn't an automatic "No" for you, I mean that it sounds like you're worried about how your brother might react.  That might be the case if there's a family dynamic of trying to get people to do things by guilting them.  That might be why now you're trying to think of a way to guilt him back -- face-punching him -- so you won't be the one who "ends up" with the guilt.

If that's the case, he could turn up the pressure by trying to guilt you further.  Just recognize it for what it is -- a family dynamic that doesn't respect boundaries.

You may think he's wrong in trying to borrow money for a frivolous and expensive, unaffordable purchase for his girlfriend.  He may think you're wrong for not helping out a family member who wants to buy something.  Each of you gets to have their own opinion -- no convincing the other person is necessary.  But you get to decide the wisest course of action for you.

As an aside, if I got a computer from my boyfriend, and realized that he had to ask his sister for money to buy it, I wouldn't enjoy it much.  That would strike me as a kind of a weird way to get a present.
Title: Re: Letting family borrow money?
Post by: pachnik on February 09, 2014, 04:43:56 PM
No, and I agree with a previous poster who said as an aside that he/she wouldn't feel comfortable accepting a gift paid for with borrowed money.  I sure wouldn't want anyone going into debt to buy me a present.  Hell no!

Title: Re: Letting family borrow money?
Post by: Greg on February 09, 2014, 04:54:02 PM
There's "no" and there's "No, what if you needed the money later and I couldn't lend it to you because you bought your girlfriend a computer?"

Why is it your responsibility, your risk, to make sure she has the latest sexiest computer?  Recommend a refurb, offer to hold layaway funds for him.  Lending the money could go wrong, like if they break up... will he still owe you the money?
Title: Re: Letting family borrow money?
Post by: Prairie Stash on February 09, 2014, 04:58:12 PM
Obviously he knows you have the money. He will be annoyed when you say no, be an adult and stick to your reasons.  I've lent money to family, I don't like it. I got resentful when I didn't see my money and saw more toys being purchased instead. Then I ended up being the jerk who had to ask "where's my money?"

So I went from being a nice guy lending money to a jerk asking for repayment...I eventually got my money but everyone was unhappy.
Title: Re: Letting family borrow money?
Post by: thepokercab on February 09, 2014, 06:18:32 PM
I mostly agree with the other posters.  Lending money so he can buy his girlfriend something is something that you shouldn't have to do.  Although- i've apparently not have the negative experiences other people have had with family and money.  I've been in trouble before, and family has lent me money. I was young and stupid.  I'd be willing to do the same for them now that i'm in a better place.  I couldn't imagine charging family interest, or getting contracts or liens involved.   But every family is different.   

Personally, I would say no, but find a way to make it a constructive rejection so to speak.  Personally, I'm very close with my brother, who is younger than me, and I want him to always think that he can come to me with whatever problem or issue he has, money or otherwise.  The last thing I would want to do is alienate him, and make it so that he never thinks that he can come to me with a problem. (no matter how ridiculous I might think the current problem is)  I don't know anything about your brother or how old he is, but I could see my 19 year old brother potentially making a similar request of me.  Of course, I'm not going to do it.  But he's 19!  I mean, i certainly wasn't mistake free when I was 19. He might be really convinced that he needs to do this for his girlfriend, I don't know.  But I would try not to automatically scoff at it, and make him feel like a moron for bringing it up.  I would sit him down, let him know that you don't have the money for something like this, but above all make it a constructive conversation. He might be upset for awhile, and angry- but that's ok.   

Title: Re: Letting family borrow money?
Post by: fantabulous on February 09, 2014, 10:33:54 PM
I really like the "NO! FUCK!" response from cjottawa's friend. In this situation, if you don't want to simply say "No." or "NO! FUCK!", I might try something along the lines of "No. That's not an emergency." perhaps with "If you buy it anyways and get yourself into an emergency because of it, I'm not bailing you out of that emergency."

My own experience with my parents is a bit mixed. We've certainly lent/given each other money for genuine emergencies, and that's been fine. My mother's name is still on my primary physical bank account from when she opened it for me as a child, and her access to that has caused a bit of strife at times. Honestly, though, it's more the deeper issues between us (that are out in the open now) than the money itself that have caused the strife. I imagine that's the actual reason people recommend not loaning money to family/friends, as it just tosses some fuel on the fire of whatever problems they already have with each other.
Title: Re: Letting family borrow money?
Post by: iamlindoro on February 09, 2014, 10:45:56 PM
This thread reminded me of...

(http://dmv.barstoolsports.com/files/2013/12/please-god-no.gif)
Title: Re: Letting family borrow money?
Post by: Adventine on February 09, 2014, 11:12:54 PM
Is this the same brother your husband criticized for not having a steady job, living with his (also your) parents and not contributing to the household expenses?

Then the answer is NO, NO, NO.
Title: Re: Letting family borrow money?
Post by: marty998 on February 09, 2014, 11:54:44 PM
Everyone is querying the money. Nobody is asking why a Macbook air?

If your brother wants to buy her a gift it should be flowers and chocolates. Not a piece of iCrap. If she needs a computer he can pay for a non-apple one for 1/4 the price.

Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 10, 2014, 12:22:17 AM
Adventine, it's the other brother.

I really appreciate the feedback. I've replied asking what he needs it for but he hasn't answered back and he hasn't told me how much just that he can pay me back in 20 days. A few days ago he was asking me how much a MacBook air costs ($1000!!!!) and that his girlfriend wants one and he's thinking of loaning her the money to get it. First off, really? Why would you want a MacBook Air if you can't afford it? Ugh. I have a second-hand desktop computer that I bought for $250, tower, monitor and all and I'm alright.

As far as I'm concerned the only reason I'd lend him money is if his kid was starving because I love that little kid too much.
Title: Re: Letting family borrow money?
Post by: Mori on February 10, 2014, 12:38:34 AM
For your reading pleasure:

http://www.getrichslowly.org/blog/2011/05/13/ask-the-readers-what-is-my-financial-obligation-to-my-family/

http://www.getrichslowly.org/blog/2011/01/26/how-to-lend-money-to-friends-without-ruining-the-relationship/
(The above is not the proper way to lend, but good comments)

http://www.getrichslowly.org/blog/2014/02/07/ask-the-readers-what-do-you-do-when-someone-constantly-hits-you-up-for-money/#comments

The comments are way more enlightening than the original article. It'll make you glad you asked before doing anything. :)

Having said that: If you have the sort of family loans work well for, go for it, but if you aren't sure, $1k is not an amount I would be comfortable losing if my brother "forgot" to pay me back. Only loan what you can stand to lose without being bitter (if it's $0, that's fine!). And learn from what happens afterwards.
Title: Re: Letting family borrow money?
Post by: Adventine on February 10, 2014, 02:08:09 AM
Adventine, it's the other brother.

I really appreciate the feedback. I've replied asking what he needs it for but he hasn't answered back and he hasn't told me how much just that he can pay me back in 20 days. A few days ago he was asking me how much a MacBook air costs ($1000!!!!) and that his girlfriend wants one and he's thinking of loaning her the money to get it. First off, really? Why would you want a MacBook Air if you can't afford it? Ugh. I have a second-hand desktop computer that I bought for $250, tower, monitor and all and I'm alright.

As far as I'm concerned the only reason I'd lend him money is if his kid was starving because I love that little kid too much.

I see. Still, don't do it. And don't tell him about that last bit you posted about your nephew. Otherwise you may end up hearing a sob story that requires you send an amount for your nephew that is conveniently equal to the cost of a MacBook Air.
Title: Re: Letting family borrow money?
Post by: Janie on February 10, 2014, 10:28:49 AM
Why would you facepunch him?  He hasn't asked for that.  Just say no, sorry. 
+1
Title: Re: Letting family borrow money?
Post by: soccerluvof4 on February 10, 2014, 10:54:19 AM
No, if you want to buy your girlfriend ? then you should find away to come up with the money by your own means.
Title: Re: Letting family borrow money?
Post by: MissStache on February 10, 2014, 12:13:11 PM
just that he can pay me back in 20 days.

Then he needs to wait 20 days and buy the damn thing himself!
Title: Re: Letting family borrow money?
Post by: Dezrah on February 10, 2014, 01:47:53 PM
There's an etiquette/manners website I regularly read (they have some amazing train-wreck stories).  They have a very specific set of phrases that everyone needs to memorize.  These are meant to shut situations down versus causing things to escalate.  OP, I think you need to use the #2 option, give no excuses and no explanations.

#1 "What an interesting assumption."

#2 "I'm afraid that won't be possible."
Variations: "I'm sorry, I cannot accommodate that request," and "No." (It is a complete sentence!)

#3 "Why would I want to do that?"
Said in a polite, inquiring way.

#4 "Have you tried the bean dip?"
And other topic diversions from rude inquiries and discussions. Variations: "So, did you see the Chicago Bears game yesterday?" and "Isn't the weather just dreadful?"

#5 "So kind of you to take an interest."
A Miss Manners recommended phrase in response to rude questions from strangers. Said "coldly" then turn away.
Title: Re: Letting family borrow money?
Post by: galliver on February 10, 2014, 02:19:56 PM
General answer to letting friends&family borrow money: yes, decided on individual basis. My parents lent me money for college, I'd be amiss to not return the favor if it were ever necessary (same with supporting them financially, really). I lent money to my bf when he was transitioning from underemployment to a real job and starting to pay off student loans. He didn't ask, but he did tell me what he was going through, so I offered. It seemed dumb to let him struggle over a few hundred bucks that I had sitting in savings doing nothing. We had zero problems, as expected. Probably brought us closer. I would lend to my sisters as well, if such a situation arose (though they'd probably go to parents first).

Answer to letting friends & family borrow money to get SO's needlessly expensive gifts: nope. There's absolutely  no good reason for it. I'm mystified how someone would think this is ok.
Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 10, 2014, 07:28:26 PM
So I said no. He's ok with it.
Title: Re: Letting family borrow money?
Post by: quilter on February 10, 2014, 07:49:22 PM
IMy mother's name is still on my primary physical bank account from when she opened it for me as a child, and her access to that has caused a bit of strife at times.

Don't know why you wouldn't shift the money to another account. Lots of banks out there

Back to the op, can't believe you posted this - a sib ( who has no problem telling me how cheap I am and spends every penny, declared bankruptcy x2 etc) asked me for money for his upcoming trip to Europe. My response : Seriously?  You have to be joking.   Your family has no right to make you uncomfortable. Once it starts it will lead to nothing but trouble

Now sometimes it hits the fan, and helping someone is the kind thing to do. But a computer for his so.  Seriously?  You have to be joking.
Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 10, 2014, 07:58:07 PM
He never did say what he needed it for. But it was the exact amount of the MacBook air. *sigh*
Title: Re: Letting family borrow money?
Post by: HappierAtHome on February 10, 2014, 08:08:53 PM
There's an etiquette/manners website I regularly read (they have some amazing train-wreck stories).  They have a very specific set of phrases that everyone needs to memorize.  These are meant to shut situations down versus causing things to escalate.  OP, I think you need to use the #2 option, give no excuses and no explanations.

#1 "What an interesting assumption."

#2 "I'm afraid that won't be possible."
Variations: "I'm sorry, I cannot accommodate that request," and "No." (It is a complete sentence!)

#3 "Why would I want to do that?"
Said in a polite, inquiring way.

#4 "Have you tried the bean dip?"
And other topic diversions from rude inquiries and discussions. Variations: "So, did you see the Chicago Bears game yesterday?" and "Isn't the weather just dreadful?"

#5 "So kind of you to take an interest."
A Miss Manners recommended phrase in response to rude questions from strangers. Said "coldly" then turn away.

I also love etiquette hell :-)

And these phrases really work!!
Title: Re: Letting family borrow money?
Post by: Mori on February 11, 2014, 07:47:10 AM
So I said no. He's ok with it.

Best ending possible. :) "No" gets easier every time (at least, it does for me). Thanks for the update.
Title: Re: Letting family borrow money?
Post by: libertarian4321 on February 13, 2014, 11:19:56 PM
I got a message from my younger brother. He wants to borrow money I think he's gonna use it to buy his girlfriend a Macbook Air.

I don't want to. It's not like he's gonna get kicked out for not paying rent or he can't buy food.

What would the situation be for you to lend money to family? It makes me uncomfortable.

I have loaned to my parents, generally for short terms when they were short on cash, because I know that they have money and are financially responsible.

I won't loan significant amounts to my brother (nothing more than $2k) because while he and his wife make pretty good money, they have never been good with it.  Small amounts for short terms if they make a good case for the money, but not large amounts or for long terms.

If my brother asked me to loan him money so he could buy some girl and overpriced computer, I'd smack him upside the head.  No loan.
Title: Re: Letting family borrow money?
Post by: nereo on February 14, 2014, 10:04:59 AM
Is it just me or is there a lot of "no!'s" going on here?

First, the OP asked under what circumstances I would lend family money.
For me, I've slowly come to a similar conclusion as what Dear Prudence always says: whenever you decide to loan a family member you have to consider it a gift.  You have to be willing to accept that there is a high likelihood that you will never be paid back, or won't be paid back in full, or that the family member won't be willing to or able to stick to your agreement.  That said, you should also have a *written* loan agreement stating the terms (i.e. what the cost of the loan is, how many and how much each payment will be, and any interest to be paid back).

I have loaned family members small sums of money and so far I've been fortunate to get it all back.  I charged only an inflationary rate of 2% and having terms lined out made him feel like he was getting a great deal, and made me feel like i was being fair and not getting taken advantage of.

As for all the people saying "no" out there - I think there's a general lack of information out here.  Computers are vital for many people's jobs; maybe that is why his girlfriend 'needs' one.  And while there are cheaper models out there, I think it's a bit elitest to scream "iCrap" or "buy a no-name brand for 1/4 the cost".  True there are netbooks and laptops for 1/4 the cost, but marketing influences us all and I think it's unfair to brand other people as mindless consumers.  There is good evidence that macbooks last significantly longer and have much better warrenties than other computers (see Consumer Reports).  Certainly doesn't justify their price premium, but as I said... marketing.

That's where I think a written agreement could come into place.  Say you aren't willing to pony up the price for a 'premium' Macbook Air but you might be willing to loan the $350 necessary for a chromebook or similar product.  Repayment of $51/month for the next 7 months.  He'd feel like you're willing to stick up for him, I think it's a reasonable amount of money to 'risk' on a blood relative, and if he holds up his end of the bargain than you've come out even without taking advantage of his situation.

Somethnig I've had to accept is that most of my family will never be as mustacian as I strive to be.  They see me as thrifty, with large sums of cash at my disposal.  Not helping them seems uncaring in their eyes, so I do what i can and gently nudge them towards a more mustacian lifestyle.  I say "well you can't afford that shiny new clown-car, so what about if i helped you by co-signing for a used, fuel efficient civic for 1/5 the price?"
Title: Re: Letting family borrow money?
Post by: CommonCents on February 14, 2014, 10:24:42 AM
Loaning money can go badly, but it doesn't always.  I lent my brother $4500 temporarily, and he paid it back promptly.  I considered before loaning:
1) Likelihood of repayment (very high - it was a temporary access to money/accounts issue)
2) Whether it would hurt our relationship if he never paid me back (I'd be annoyed, but we'd still be close)

I would also given if it was needed for basic food, shelter, etc.  (It wasn't, but it wasn't frivolous either and it was time sensitive.)

I also knew my parents would make me whole if he didn't repay.  (They would have lent him it temporarily, but it was an odd situation where the cash was needed that day, and only I had an account that could transfer to his that day, because it was w/in the bank.  They offered to transfer to me so he'd owe them for the few weeks, but I declined.)
Title: Re: Letting family borrow money?
Post by: ritchie70 on February 14, 2014, 10:38:56 AM
For me, I've slowly come to a similar conclusion as what Dear Prudence always says: whenever you decide to loan a family member you have to consider it a gift.  You have to be willing to accept that there is a high likelihood that you will never be paid back, or won't be paid back in full, or that the family member won't be willing to or able to stick to your agreement.

This attitude drives me crazy. I saw it on Reddit recently too. Does everyone's family suck this much?

I loaned my mom around $30,000 roughly 15 years ago for a couple years. I don't remember if she asked or I offered because she needed it, but I had no doubt in my mind that she would pay me back. There was no written documentation or anything like that.


Title: Re: Letting family borrow money?
Post by: Redfive20 on February 14, 2014, 10:49:25 AM
When we lent our family member money, we didn't expect it would be returned. It depends on family and the culture where they are. In the country where I came from, it was generally assumed a gift. The family member who is most well off is expected to give gift (moneys) to help out the rest of family.
Title: Re: Letting family borrow money?
Post by: Spork on February 14, 2014, 10:53:36 AM
For me, I've slowly come to a similar conclusion as what Dear Prudence always says: whenever you decide to loan a family member you have to consider it a gift.  You have to be willing to accept that there is a high likelihood that you will never be paid back, or won't be paid back in full, or that the family member won't be willing to or able to stick to your agreement.

This attitude drives me crazy. I saw it on Reddit recently too. Does everyone's family suck this much?

I loaned my mom around $30,000 roughly 15 years ago for a couple years. I don't remember if she asked or I offered because she needed it, but I had no doubt in my mind that she would pay me back. There was no written documentation or anything like that.

There are always outliers.... but I think the reason everyone has that attitude is because: If they're asking me, there is a reason.  In other words, if they're getting to the point they're asking me, then the other normal places have said no already: banks, credit unions, credit card maxed, etc.

I don't know the age of the OP's brother... but my first thought was that a 30 day loan is the perfect (mustacian possibly) reason to use a credit card. 

Title: Re: Letting family borrow money?
Post by: nicknageli on February 14, 2014, 10:54:45 AM
The family member who is most well off is expected to give gift (moneys) to help out the rest of family.

I'm curious.  In your culture, the family that makes $40k a year but saves is expected to give money to the sibling who makes $100k a year but needs $5k to help pay off his vacation to Hawaii? 
Title: Re: Letting family borrow money?
Post by: FunkyStickman on February 14, 2014, 12:01:40 PM
I never loan money, family or otherwise. If I'm going to give them anything, it's a gift, not a loan. I gifted my mother-in-law $500 this Christmas so she could fix her car. I don't expect anything in return, other than her coming to visit with it.. :)

Glad you decided to make the decision. Hope it goes well from this point onward. I really don't understand why he asked you to give him money for his girlfriend, though... that's just lame. Why not ask her parents? Lol.
Title: Re: Letting family borrow money?
Post by: ritchie70 on February 14, 2014, 12:23:46 PM
For me, I've slowly come to a similar conclusion as what Dear Prudence always says: whenever you decide to loan a family member you have to consider it a gift.  You have to be willing to accept that there is a high likelihood that you will never be paid back, or won't be paid back in full, or that the family member won't be willing to or able to stick to your agreement.

This attitude drives me crazy. I saw it on Reddit recently too. Does everyone's family suck this much?

I loaned my mom around $30,000 roughly 15 years ago for a couple years. I don't remember if she asked or I offered because she needed it, but I had no doubt in my mind that she would pay me back. There was no written documentation or anything like that.

There are always outliers.... but I think the reason everyone has that attitude is because: If they're asking me, there is a reason.  In other words, if they're getting to the point they're asking me, then the other normal places have said no already: banks, credit unions, credit card maxed, etc.

I don't know the age of the OP's brother... but my first thought was that a 30 day loan is the perfect (mustacian possibly) reason to use a credit card.

I think at the comparatively low amount that would fit on most "normal" credit cards, it's hard to justify asking family for a loan. If you want to buy your girlfriend a MacBook and don't have enough "room" on your credit card to do it, I don't want to loan it to you.

When I owned a business and people wanted me to "bill them later" my attitude was always that if they couldn't use a credit card to pay their $300 repair bill, I sure wasn't going to loan it to them either. I had one manager who always wanted to do that, and I finally told him that if he did it and it hit 90 days aging, it was coming out of his check - in essence, that he was guaranteeing the loan. That pretty much stopped him...

My mom's situation was that she was in the middle of building a new house and selling the old house, which unfortunately sat on the market for almost two years before it sold. The bank had already maxed out its willingness to lend on the old and new house to fund the construction, and $30K doesn't fit on most people's credit cards.
Title: Re: Letting family borrow money?
Post by: netskyblue on February 14, 2014, 12:37:05 PM
Nope, not in that circumstance I wouldn't.  That's totally a "want," and one he can't afford.

Would I ever lend money to a family member?  Possibly.  My sister's had a real rough time these past weeks, first with the cost of propane shooting up (and them needing to refill their tank, and suppliers imposing a minimum quantity), then they found out their well is going dry, and now she's been diagnosed with Raynauds disease - all this in the past month.  I know their little nest egg (just got married last year) is dwindling fast with all these minor emergencies.  She hasn't asked for money, and I know she wouldn't unless she truly had *NO* other option, but if she did, I'd lend some.  And probably not insist on payback.  (Though I believe she eventually would.)



Title: Re: Letting family borrow money?
Post by: Bethersonton on February 14, 2014, 03:49:24 PM
Quote
Letting family borrow money?

Answer: No.

Longer answer: Never.

You can gift money, never lend. But even that causes issues.

Also, "for my girlfriend's macbook air" is a TERRIBLE REASON. Yeeps.
Title: Re: Letting family borrow money?
Post by: Bateaux on February 14, 2014, 03:59:01 PM
I've borrowed money from family but have never loaned money to family.  My wife has gifted money when she saw fit. 
Title: Re: Letting family borrow money?
Post by: Redfive20 on February 14, 2014, 05:05:14 PM
The family member who is most well off is expected to give gift (moneys) to help out the rest of family.

I'm curious.  In your culture, the family that makes $40k a year but saves is expected to give money to the sibling who makes $100k a year but needs $5k to help pay off his vacation to Hawaii? 

People didn't normally borrow money for something like vacation when I was there. The country was very poor before. My parents were the only child in their respective families who was able to get a college education. They had been sending a portion of their salary to their siblings and later their parents until a few years ago when all of their parents passed away. They were also retired some years ago. It means that during all of their working years they contributed to their extended families and later their parents. The money they gave was used to more likely to pay the living expenses. However, they don't control how other people use the money they gave and some of their siblings had done more vacations than them in the recent years when most people in the country got richer faster than other places and started to travel globally. Since I have left it for decades, I can't speak what people would think now about your questions.
Title: Re: Letting family borrow money?
Post by: Melody on February 14, 2014, 06:14:42 PM
Has he got a plan to pay it back. I have borrowed large amounts from my sister in the past with solid plans to pay it back (for example, my final pay cheque was delayed by something like 3 weeks once and a scholarship by 8 weeks at the same time... I was relying on this money to pay rent, travel on a already paid lots of costs towards it vacation etc). So I'd be asking when and how he'll pay it back...
Title: Re: Letting family borrow money?
Post by: more4less on February 14, 2014, 06:57:37 PM
I will be in minority here.
I lent money to friends few times. Never had any problem. Maybe I was just lucky.
I consider this as a sort of community service. Some of these stories are relevant to my immigrant experience. Also I despise predatory lending practices and wouldn't like to see any of people who are close to me turning to this payday loans establishments.

1. One of my friends was in quite bad situation - lost job with insurance, and was late on rent. I lent him some money. I'm very happy that I did it - that was the only way to help him since he was 3000 miles from me. It bought him some time, and half year later he got his shit together and repaid me. That experience actually made him real saver.
2. My GF had once problems with back taxes, so I covered it. She repaid me even though it wasn't said or implied.
3. Most recent and the silliest: I lent some money to a friend so he could buy new turbo for his car. Well, stupid idea, I know. On top of it loan was made in non-US currency, and exchange ratio changed ~10%. Learned my lesson about foreign exchange risks.
4. Also I lent some money to a friend moving to US, so she will be able to get herself her 1st car.
5. Lent some money for a friend to start up a small business. It was more like a crowd-funding type of deal, but everyone who took part was repaid eventually.

I was quite comfortable with mentioned above debts since I could write them off without noticeable impact to my balance. Once, however, I lent very significant amount of money to a friend who was moving from overseas, so he could pay huge deposit for his Manhattan apartment (it's quite tough to rent a nice place with no credit history in US). It's not in my habits to give such loans, but the guy is basically family to me and he had excellent job waiting for him there. He repaid my in two weeks from his signing bonus.

I have certain rules:
1. Don't lend to the closest family - just give
2. Don't charge interest, instead remember that I do this it not for money. However, small tokens of appreciation are appreciated.
3. Don't lend for luxury (like OP's case, or new turbo from my 3rd story). On the other hand, despite higher risks I'm fine with lending for business ventures after business idea consideration.
4. Don't have outstanding loans for more than 10% of my emergency cash fund.
5. Don't lend regularly to the same person - always try to offer financial counseling to see how person got into this situation and what can be done to prevent problems in future.
6. Don't insist on promissory note. If I don't trust person's word, why would I give him money? Usually borrower writes me a check and lets me know when I can deposit it.
Title: Re: Letting family borrow money?
Post by: Spork on February 14, 2014, 09:17:26 PM
Just an FYI to those that want to do interest free / no-written agreement loans to friends and family: The IRS really doesn't like you.  You probably won't get caught for smallish loans, but charging zero interest does have tax implications.

sample article (though there are many if you want to go poike around)
http://online.wsj.com/news/articles/SB10001424052702303822204577464360987873678
Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 14, 2014, 09:44:58 PM
He decided to sell his iPhone and his other phone to come up with the money. My mother has always been the kind to take out loans and use credit cards (once one loan is paid off, she'll take out another one, repeat) and I really don't want my brothers to follow in her footsteps. They don't have credit cards and they do short term loans through their work (government employees in the Philippines). I've told them to start saving up, even just a little bit a month, trying to get them to be financially responsible. But it's hard to get them to listen. I'm 33, middle bro is 32, youngest is 31.
Title: Re: Letting family borrow money?
Post by: ch12 on February 15, 2014, 06:50:12 AM
Nope, not in that circumstance I wouldn't.  That's totally a "want," and one he can't afford.

Would I ever lend money to a family member?  Possibly.  My sister's had a real rough time these past weeks, first with the cost of propane shooting up (and them needing to refill their tank, and suppliers imposing a minimum quantity), then they found out their well is going dry, and now she's been diagnosed with Raynauds disease - all this in the past month.  I know their little nest egg (just got married last year) is dwindling fast with all these minor emergencies.  She hasn't asked for money, and I know she wouldn't unless she truly had *NO* other option, but if she did, I'd lend some.  And probably not insist on payback.  (Though I believe she eventually would.)

I'd have zero problem telling my sister no for a MacBook Air. I buy her little things like movies and books now and again, but those are shared between us.

Medical problems are in a whole other category. Even without her asking, if I knew that she was a bit low on cash and had medical problems, I'd pitch in as soon as she told me where she was being treated. The med-ed exemption on gift tax means that you can help with education or medical expenses without running into the gift cap. Helping family with medical expenses when they need help is the right thing to do.
Title: Re: Letting family borrow money?
Post by: ichangedmyname on February 15, 2014, 07:25:56 AM
Medical problems would definitely be one of those things.
Title: Re: Letting family borrow money?
Post by: nereo on February 15, 2014, 05:14:55 PM
For me, I've slowly come to a similar conclusion as what Dear Prudence always says: whenever you decide to loan a family member you have to consider it a gift.  You have to be willing to accept that there is a high likelihood that you will never be paid back, or won't be paid back in full, or that the family member won't be willing to or able to stick to your agreement.

This attitude drives me crazy. I saw it on Reddit recently too. Does everyone's family suck this much?

I loaned my mom around $30,000 roughly 15 years ago for a couple years. I don't remember if she asked or I offered because she needed it, but I had no doubt in my mind that she would pay me back. There was no written documentation or anything like that.
I never said my family sucks - in fact I have always had money I've lent repaid back. My family members have been very grateful and in the end it's been a win-win for everyone.
I think my point was misconstrued though; i wasn't suggesting that the money wouldn't get paid back.  Perhaps a better way to phrase it is that I simply don't lend money if it's an amount I'm not comfortable with loosing forever.  There's a lot of circumstances where a loan to a family member might not be repaid: death, serious injury causing bankruptcy, long-term unemployment, a lawsuit, etc.  In such circumstances I don't want to compel a family to liquidate assets just to cover a debt with me; hence, in my mind i always have to be ok with NOT being repaid and keeping my family ties intact.  That's what I meant when I said that I consider any loan to a family member a gift. 


Title: Re: Letting family borrow money?
Post by: Nords on February 15, 2014, 09:28:17 PM
Just an FYI to those that want to do interest free / no-written agreement loans to friends and family: The IRS really doesn't like you.  You probably won't get caught for smallish loans, but charging zero interest does have tax implications.
sample article (though there are many if you want to go poike around)
http://online.wsj.com/news/articles/SB10001424052702303822204577464360987873678
We've offered to do this for a family member who's considering medical school.  We'd effectively be the banker who issues the student loan at whatever AFR is force when they want the loan(s).  It's a little better than long-term CD rates, but not necessarily a risk-adjusted return.  They're taking the MCAT and applying to medical schools, and we'll revisit the question in a few months.

Complications include disasters like unemployment or lenders/borrowers divorcing or dying before the loan is paid back, and whether an unpaid loan should be included in probate or forgiven.  We'd also have to issue some sort of 1098 for the interest.  However it looks as if it can all be written up in a two-page agreement, and that's more for the benefit of the IRS than for the people swapping the money.

I think the biggest issue is how both sides perceive their lifestyles and their obligations during the loan repayment.  It's all too easy for people to feel that they're being criticized or disrespected (irrespective of the actual situation), and that can lead to long-simmering resentments or outright disputes.  My spouse and I have also had a few interesting conversations about our own attitudes toward family lending.  We might not be quite as altruistic as we'd like to think we are, and we certainly have control issues.

While I'm willing to lend at 3% to a worthy family member who'd otherwise be trying to borrow at 6%, it might not be in their best interest to take my money.  They were very grateful (and relieved) to get the offer, and that's what really counts. 
Title: Re: Letting family borrow money?
Post by: SAHD on February 16, 2014, 07:42:47 PM
the only way to ever borrow money to a friend or family member is to do it knowing you will most likely NEVER EVER get it back.  If you can stand to be around these people after they do not pay you back than go ahead.  Me I tend to hold grudges I have given money but lost friends.