Author Topic: Should I insist on the interest of a personal loan?  (Read 21534 times)

Lordy

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Should I insist on the interest of a personal loan?
« on: May 06, 2016, 04:13:42 PM »
Hello fellow Mustachians,

this week I found myself in a little dilemma that I wanted to get your opinions on. Here is the story:

About a year ago an old friend (we have literally known each other for half our lifetimes) asked me to lend
him money to cover short-term expenses. I was a bit shocked when he asked for $7000 but considering that
he owns the apartment he lives in, has a steady job and showed me a summary of his long-term savings
account (insurance-style so not easily liquidated) I told him that I would do it, if we set up proper paperwork.

I went ahead and downloaded the template for a personal loan that described persons involved, the amount,
due date (max. 1 year) and specified an interest rate of 5%. We both signed the document and I wired him
the money to his account, all good. That was 10 months ago.

Fast forward to this week and he texts me that he would like to repay me. I send him my bank details (which
were in the contract) and he wires me the money back. $7000 are back safely in my account. However, he did
not add the interest (roughly $300) to that repayment.

Here is my question: Should I insist on him paying that interest?

I did not lend him the money to collect the interest (there are certainly better ways to make 5%) but wanted to
make sure that it is not considered interest-free and gets the lowest priority. The contract is very clear that I am
entitled to the interest. On the other hand we have been friends for a long time (15+ years), he has his second
baby on the way and has repaid as agreed. I don't really need the $300 either but it's a little too much money to
simply leave on the table. If it would be $50, I would just forget about it. If it would be $500 I would definitely
ask for it, but $300 is right in the zone where I am not sure what do to.

Thanks for any input :)
  Lordy

mm1970

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Re: Should I insist on the interest of a personal loan?
« Reply #1 on: May 06, 2016, 05:26:57 PM »
I'd let it go, personally.  Not worth losing a friendship.

Villanelle

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Re: Should I insist on the interest of a personal loan?
« Reply #2 on: May 06, 2016, 05:30:17 PM »
I'd let it go.  I also wouldn't lend him money again. 

starguru

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Re: Should I insist on the interest of a personal loan?
« Reply #3 on: May 06, 2016, 05:30:22 PM »
Will simply asking jeopardize the friendship?  I wouldn't feel bad just politely asking. 

Or let it go.  You did a good thing, and he did repay (for all intents and purposes) so basically alls well. 

SwordGuy

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Re: Should I insist on the interest of a personal loan?
« Reply #4 on: May 06, 2016, 05:30:51 PM »
I'd let it go, personally.  Not worth losing a friendship.

Alternatively, friends don't steal $300 from their friends.

I would let it go, but I wouldn't trust them fully either.

lbonga1

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Re: Should I insist on the interest of a personal loan?
« Reply #5 on: May 06, 2016, 09:21:43 PM »
Maybe he no longer has the paperwork and/or doesn't know how much interest he owes you? You could casually mention it...something along the lines of "Thanks for paying me back! Based on the time period of the loan, you would owe me $300 in interest." You could even offer to let him pay you the interest at his convenience, perhaps after the baby is born. I wouldn't be pushy about it though, and if after that he still doesn't pay you, I just wouldn't loan to him again.

asiljoy

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Re: Should I insist on the interest of a personal loan?
« Reply #6 on: May 06, 2016, 10:01:47 PM »
If he's been a solid friend for you for 15 years and has a baby on the way, I'd assume paperwork got lost and he meant well. I'd cut him some slack and chalk it up to a chaotic life. Besides, over time it'll all even out. My friendship group doesn't necessarily lend money to each other, but we take turns hosting game nights/someone might cover a check now and then/get each other kids stuff/give help moving/:: insert friendshipy stuff here ::. It all evens out.

plog

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Re: Should I insist on the interest of a personal loan?
« Reply #7 on: May 06, 2016, 11:15:57 PM »
I agree with everyone else that you "should let it go"...however...Are honestly capable of "letting it go"?

Not a lot of people actually are.  It's a fine theory, but practice can be a bitch. Will this simmer below the surface of future interactions with him?  Will this be dredged up if you guys getting into an unrelated disagreement?  Or you get drunk with him one night and tell him how you really feel? 

If not, problem solved--let it go.  If any of those are a possibility, maybe its better you bring it up. 

 

little_brown_dog

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Re: Should I insist on the interest of a personal loan?
« Reply #8 on: May 07, 2016, 06:27:36 AM »
1. You don't need the money
2. The loan was paid back in full prior to the max time limit, showing great money management and the fact that your friend is responsible and appreciated the loan
3. This is your friend who you really value in your life
4. There is reason to believe this wasn't intentional (if he can pay pay 7k in 10 months, chances are he has $300 too; hectic life changes for him, etc)

Seems like you want to risk an awkward scenario for what....money you don't need? The principle of the matter? It sounds like your friend is definitely the type to pay the interest if you ask, but it's going to be a little uncomfortable and neither of you may feel good about it after.

Forget what is "right" and "just" for a second- focus on what you want most. Do you want the money the most, or do you want to avoid conflict in your relationship the most? Just do what gets you closer to what you want.

Paul der Krake

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Re: Should I insist on the interest of a personal loan?
« Reply #9 on: May 07, 2016, 06:42:01 AM »
Is it possible that he doesn't understand how interest works? Maybe he believes since it's been less than a year, then no interest is due.

erae

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Re: Should I insist on the interest of a personal loan?
« Reply #10 on: May 07, 2016, 07:32:55 AM »
"I did not lend him the money to collect the interest...but wanted to
make sure that it is not...the lowest priority."

I'm in the Let It Go team. You said in your OP that the purpose of the interest was to incentive prompt repayment. Sounds like you received quick repayment.

lostamonkey

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Re: Should I insist on the interest of a personal loan?
« Reply #11 on: May 07, 2016, 07:49:02 AM »
I would try to collect but not push too hard. I would feel like he "stole" $300 from you regardless of whether you needed the money.

Tjat

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Re: Should I insist on the interest of a personal loan?
« Reply #12 on: May 07, 2016, 10:20:20 AM »
I'd at least mention it... Why should he stiff you?

Johnez

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Re: Should I insist on the interest of a personal loan?
« Reply #13 on: May 07, 2016, 10:35:08 AM »
I'd let it go. A few things:

Was the interest clear and findable, or buried? How'd you guys go over the contract, was it simply an afterthought or did you guys go through the points?

He might be absent minded, or a jerk. Now you know.



desertadapted

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Re: Should I insist on the interest of a personal loan?
« Reply #14 on: May 07, 2016, 12:42:15 PM »
Solidly in the "let it go" camp.  This is a friendship, not a business relationship.  Long lasting friendships are hard to come by, and any relationship that goes on long enough will have its petty insults and minor annoyances along the way.  Not only should you let it go, but you should check your head and make sure you've actually let it go, so that it doesn't become a lingering resentment.  Further, he's not your kid, or someone else who needs a lesson in financial maturity from you.  You achieved your objectives - prompt repayment and hooking up a friend in need.  If you can't let it go, perhaps you raise it as an 'attaboy/appreciation for paying you back promptly, and tell him to not worry about the interest, but beers are on him next time. . .

Suze456

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Re: Should I insist on the interest of a personal loan?
« Reply #15 on: May 07, 2016, 12:44:12 PM »
Apart from signing the agreement, did you discuss interest and the fact that if you had the  7k invested for the 10 months, you would make x in interest? So the loan would cost you x?

JLee

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Re: Should I insist on the interest of a personal loan?
« Reply #16 on: May 07, 2016, 12:50:26 PM »
Apart from signing the agreement, did you discuss interest and the fact that if you had the  7k invested for the 10 months, you would make x in interest? So the loan would cost you x?

Looking at my portfolio, leaving $7k in cash vs invested wouldn't really make much difference.

Captain FIRE

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Re: Should I insist on the interest of a personal loan?
« Reply #17 on: May 07, 2016, 01:17:53 PM »
Solidly in the "let it go" camp.  This is a friendship, not a business relationship.  Long lasting friendships are hard to come by, and any relationship that goes on long enough will have its petty insults and minor annoyances along the way.  Not only should you let it go, but you should check your head and make sure you've actually let it go, so that it doesn't become a lingering resentment.  Further, he's not your kid, or someone else who needs a lesson in financial maturity from you.  You achieved your objectives - prompt repayment and hooking up a friend in need.  If you can't let it go, perhaps you raise it as an 'attaboy/appreciation for paying you back promptly, and tell him to not worry about the interest, but beers are on him next time. . .

+1

Retire-Canada

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Re: Should I insist on the interest of a personal loan?
« Reply #18 on: May 07, 2016, 01:20:14 PM »
I'd let it go.  I also wouldn't lend him money again.

Agreed. Be happy you got the principal back. Don't lend him money again.

MissNancyPryor

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Re: Should I insist on the interest of a personal loan?
« Reply #19 on: May 07, 2016, 01:39:05 PM »
I think I would ask him in whatever friends-for-15-years voice you can, you choose, keep it light.  If he does the aw-shoot, I lost the paperwork routine and does pay it then perhaps I would give it to back to him in a few months as a gift on the arrival of the new baby (or maybe even forgive it right on the spot if he genuinely seems concerned about managing baby costs) and give him well wishes.   You can honestly thank him for being such an awesome friend, as you were an awesome friend to him when you loaned it; the fact that he did pay back the $7K is pretty freaking great and goes against all odds. 

Spork

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Re: Should I insist on the interest of a personal loan?
« Reply #20 on: May 07, 2016, 01:49:39 PM »
I'm voting with the majority.  Let it go.  Don't let it happen again.

If he did ask again (which I hope is unlikely) I'd say no and I'd tell him "because it wasn't paid back in full."

dragoncar

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Re: Should I insist on the interest of a personal loan?
« Reply #21 on: May 07, 2016, 01:58:30 PM »
Sue the fucker!  PM me for my hourly rate.

Cassie

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Re: Should I insist on the interest of a personal loan?
« Reply #22 on: May 07, 2016, 02:40:27 PM »
Definitely let it go. You are good friends and don't lose that over 300.

Jim2001

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Re: Should I insist on the interest of a personal loan?
« Reply #23 on: May 07, 2016, 03:05:50 PM »
+1 one for mentioning it if you feel you must, but I'd let it go.

My guideline is that I never lend money to friends or family unless I'm willing to view the principal as a gift and never mention it again.

And, yes, I do have $6000 friends!  I got a call late last year asking for a loan from a buddy I've know for about 10 years.  I wrote the check that afternoon from my emergency fund and wasn't expecting interest (after all, I wasn't getting any from the bank).  He pledged it back in three weeks.  It took six, but I didn't ask about it in the interim.  We went out for a beer and he made good on the loan plus $500 in interest.  There are other folks I won't lend a dime to.

« Last Edit: May 07, 2016, 05:50:43 PM by Jim2001 »

rockstache

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Re: Should I insist on the interest of a personal loan?
« Reply #24 on: May 07, 2016, 05:16:40 PM »
Send him a card congratulating him on the baby and write in the card that you're gifting him the $300.

woopwoop

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Re: Should I insist on the interest of a personal loan?
« Reply #25 on: May 07, 2016, 05:47:56 PM »
I'd vote for letting it go. He probably forgot about the interest and isn't withholding maliciously. The time to remind him would have been when sending over the bank details (along with the interest rate calculation and balance due), but now I think it's awkward to ask for it. For a close friend, consider it a $300 gift and move on.

tobitonic

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Re: Should I insist on the interest of a personal loan?
« Reply #26 on: May 07, 2016, 06:12:16 PM »
Everyone's already covered it. This is one of those penny wise, pound foolish situations.

Villanelle

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Re: Should I insist on the interest of a personal loan?
« Reply #27 on: May 07, 2016, 06:47:07 PM »
I'd vote for letting it go. He probably forgot about the interest and isn't withholding maliciously. The time to remind him would have been when sending over the bank details (along with the interest rate calculation and balance due), but now I think it's awkward to ask for it. For a close friend, consider it a $300 gift and move on.

Maybe he did just forget.  But if I dear friend of mine did me the exceptionally generous favor of lending me a large sum of money, I'd sure as hell go out of my way to make sure I followed every last detail of the agreement.  It's not something I'd take for granted.  and that's why in this case, I'd write it off, but also never loan him money again, because to me forgetting the word he gave in exchange for the loan suggests he didn't take it all that seriously. 

I wouldn't end the friendship, but I would consider it a sign that he places less value on a loan of $5000 than I do.  Cool.  Everyone is different.  But given our differing values, I'd not do it again. 

LeRainDrop

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Re: Should I insist on the interest of a personal loan?
« Reply #28 on: May 07, 2016, 06:52:13 PM »
I'd vote for letting it go. He probably forgot about the interest and isn't withholding maliciously. The time to remind him would have been when sending over the bank details (along with the interest rate calculation and balance due), but now I think it's awkward to ask for it. For a close friend, consider it a $300 gift and move on.

Maybe he did just forget.  But if I dear friend of mine did me the exceptionally generous favor of lending me a large sum of money, I'd sure as hell go out of my way to make sure I followed every last detail of the agreement.  It's not something I'd take for granted.  and that's why in this case, I'd write it off, but also never loan him money again, because to me forgetting the word he gave in exchange for the loan suggests he didn't take it all that seriously. 

I wouldn't end the friendship, but I would consider it a sign that he places less value on a loan of $7000 than I do.  Cool.  Everyone is different.  But given our differing values, I'd not do it again.

Same feelings as Villanelle.

meep

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Re: Should I insist on the interest of a personal loan?
« Reply #29 on: May 07, 2016, 08:44:10 PM »
Is it possible that he doesn't understand how interest works? Maybe he believes since it's been less than a year, then no interest is due.

I could see this being a little more realistic than simply forgetting. Maybe he thought it was a 0% interest loan if he paid before the year was up and interest only kicked in if he paid at or after the due date.

Rewdoalb

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Re: Should I insist on the interest of a personal loan?
« Reply #30 on: May 08, 2016, 04:12:54 PM »
I'd say let it go.

Loans to friends are dangerous to begin with but I feel like unless it's longer than one year, charging interest feels too robotic and unfriendly. Like others said, he may have even viewed your interest charge as a penalty for paying late.

If you can't truly let it go without having a grudge in your heart, I also like the idea of mentioning "Oh and don't worry about the interest. Happy new baby". If he truly forgot than he'll feel extra thankful and if he's a schemin SOB than - whatever, it wasn't even a one year loan and he paid it back.

Dezrah

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Re: Should I insist on the interest of a personal loan?
« Reply #31 on: May 09, 2016, 10:09:49 AM »
I once borrowed $8k as a bridge loan from my parents. No terms or formal arrangements other than it I only needed it for a month or so. The situation changed in a good way but it did mean I couldn't pay back for several months. Five months later I transferred back the full amount plus $250.

A few weeks later as we're having dinner together, my mom asks me whether I sent extra. I feigned ignorance and acted like I don't keep track of that level of detail but I wasn't fooling anyone. She let it drop though. To me it was more important to show my appreciation with hard evidence than have that cash. She obviously agreed the amount was not worth fussing over and this was important to me.

I suspect your friend knows he's not meeting the terms but that $300 is actually really important to him. Instead of "letting it go", refile the amount in your brain as a generous baby gift for someone who really needs it.

mm1970

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Re: Should I insist on the interest of a personal loan?
« Reply #32 on: May 09, 2016, 01:50:36 PM »
I'd let it go, personally.  Not worth losing a friendship.

Alternatively, friends don't steal $300 from their friends.

I would let it go, but I wouldn't trust them fully either.
Yah, I mean, I'd never loan them money again.

UnleashHell

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Re: Should I insist on the interest of a personal loan?
« Reply #33 on: May 09, 2016, 03:10:46 PM »
Write a card when the baby is born.
in it tell him that the $300 in  interest should be put into an investment account for the baby.

Everyone wins.

dragoncar

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Re: Should I insist on the interest of a personal loan?
« Reply #34 on: May 09, 2016, 03:31:05 PM »
Write a card when the baby is born.
in it tell him that the $300 in  interest should be put into an investment account for the baby.

Everyone wins.

While you're at it, submit directly to http://www.passiveaggressivenotes.com/

starguru

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Re: Should I insist on the interest of a personal loan?
« Reply #35 on: May 09, 2016, 03:37:41 PM »
I still feel he should ask.  Seems like people are trying to avoid conflict in the friendship but I think that cuts both ways.  Not paying back according to the terms is taking advantage of a friend, it could just as easily cause problems.

1.  Is it possible the terms weren't clear?  Is it possible he thought he only needs the interest if he is late in payment?
2.  Is it possible he just forgot?
3.  You know your friend, if you bring this up is it going to cause issues?  Seems (to me at least) that for true friends bringing up a topic should always be ok.

Tester

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Re: Should I insist on the interest of a personal loan?
« Reply #36 on: May 09, 2016, 03:53:02 PM »
Don't send the baby greeting saying you gifted the 300.
That is the same as asking it back only in a bad way - by making him feel bad in a moment when he should be happy.
If you want to ask it back ask directly.
Plus, if he really misunderstood things and thought he will only owe the interest after one year you risk losing the friendship.

So, if you let it go let it go - I would just tell him to go for a beer and that he is paying.
If he asks why mention that you are celebrating his baby arrival and the fact that he paid the loan :).
« Last Edit: May 09, 2016, 03:54:50 PM by Tester »

SKL-HOU

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Re: Should I insist on the interest of a personal loan?
« Reply #37 on: May 09, 2016, 08:06:21 PM »
Don't ask for the interest. If the interest is that important, next time don't lend him the money. I highly doubt your friend did this knowingly.

heybro

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Re: Should I insist on the interest of a personal loan?
« Reply #38 on: May 09, 2016, 08:15:00 PM »
NEVER lend money.  Give money all you want. 

There are literally millions of businesses who's sole purpose in life is to lend out money - they are professionals and they want to lend money out.  If someone defaults, they have millions of dollars elsewhere to cover the loss.  A small loan to someone is what they are dying to do and they are so easily able to cover it.  If someone can't get money from all those sources, then there is no way in mustache that you are going to be able to do so without getting hurt.