Author Topic: Letting family borrow money?  (Read 19602 times)

ichangedmyname

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Re: Letting family borrow money?
« Reply #50 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.

ch12

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Re: Letting family borrow money?
« Reply #51 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.

ichangedmyname

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Re: Letting family borrow money?
« Reply #52 on: February 15, 2014, 07:25:56 AM »
Medical problems would definitely be one of those things.

nereo

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Re: Letting family borrow money?
« Reply #53 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. 



Nords

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Re: Letting family borrow money?
« Reply #54 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. 

SAHD

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Re: Letting family borrow money?
« Reply #55 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.