Author Topic: Should I lend money to family?  (Read 6502 times)

hhehe45

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Should I lend money to family?
« on: October 28, 2016, 04:58:16 PM »
I was going to write this long drawn out detailed explanation of my situation but in general, is this ever a good idea? Please give me your thoughts because I'm very torn.

Janie

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Re: Should I lend money to family?
« Reply #1 on: October 28, 2016, 05:00:28 PM »
I would consider making a gift in some circumstances. Loans are probably not a good idea.

TomTX

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Re: Should I lend money to family?
« Reply #2 on: October 28, 2016, 05:02:16 PM »
Fuck no.

If you have to ask the question - the answer is no.

Spork

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Re: Should I lend money to family?
« Reply #3 on: October 28, 2016, 05:05:12 PM »
I'm in agreement with both above...  If it seems appropriate to GIVE them the money (based on the situation) ... and you have it...  and you don't need it... and it would make you feel better to give it than to keep it -- then do it.  If all those 'ifs' are not met... I'd say hell no.

calimom

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Re: Should I lend money to family?
« Reply #4 on: October 28, 2016, 05:10:24 PM »
Actually an explanation of the circumstances would be helpful. Give money to a family member whose child is undergoing cancer treatment? Hell yes. Give money to a family member who is unemployed by choice to they can buy lottery tickets? Hell no.

former player

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Re: Should I lend money to family?
« Reply #5 on: October 28, 2016, 05:14:44 PM »
I'd say yes it's OK as long as your family member is 100% trustworthy or you will be OK with not getting the money back.

(Speaking here as someone who has both lent and borrowed 5 figure sums from family, with payment back exactly as proposed on both sides.)

RosieTR

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Re: Should I lend money to family?
« Reply #6 on: October 28, 2016, 05:26:25 PM »
My inclination would be no. This isn't urgent, and if they can't save $7K in a reasonable amt of time, how will they afford raising the child?

In general, if a person is willing to sign a written contract outlining pay back terms, and there is a good reason to move forward with a private loan, then it may be ok. If one of those is not met, either do a gift or say no. Personal loans are often a detriment to both parties: the lender is exposed to non-payment usually without the corresponding risk:interest return, and the borrower gets no credit reporting for paying it back. Then there are the emotional risks, which are difficult to quantify but no less present.

If you are unsure you can afford it, you can't.

tonysemail

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Re: Should I lend money to family?
« Reply #7 on: October 28, 2016, 05:32:37 PM »
I have about $4500 in savings. I think they think I have more money than I actually do of that makes sense.

nope, you shouldn't raid your savings.  They are your safety net for when shit hits fan.

Isn't the perception problem easy to fix?
Just tell them the truth about not having 5 figure sums of money to loan.

sparky28

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Re: Should I lend money to family?
« Reply #8 on: October 28, 2016, 05:35:46 PM »
Generally, loans to family should be 'written off' as gifts. While your brother has shown his ability to pay back $7k within a year, why hasn't he been able to save that money himself in that time? Buying a house should take planning and thought, so why not wait a year.

You note your hesitation (you wouldn't come to a forum of stranger if you didn't) for the implications for the future. Raising a child will require money. He does not have that money to even adopt, let alone raise. Have a serious chat with him about his ability to provide and plan for his family's future (...this convo might be tougher than I suggest). If you were to give him money for this adoption, I'd caveat it with some serious things - a review/overhaul of his actual budget/expenses/income. This money is not only an investment in him, but also this adopted child. It needs strings attached.

Also your personal savings of $4.5k make this an easy one (but raises questions - you lent $7k already, where did it go?). You simply don't have the money at this point. You shouldn't set yourself on fire to keep someone else warm.

radram

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Re: Should I lend money to family?
« Reply #9 on: October 28, 2016, 05:45:41 PM »
So my brother needs help with adopting a child. He and his wife asked me for a loan of about $7000 last year for their house and paid it back in less than a year. I don't know if I'm in a situation to help out or not. I have about $4500 in savings. I think they think I have more money than I actually do of that makes sense.

If I can't give it to them they have to get it from somewhere which means my parents. They're draining all their resources to do this. So I don't know what to do.

So they don't have enough money to adopt a child?  One way to look at this is THEY DON'T HAVE ENOUGH MONEY TO ADOPT A CHILD.

GizmoTX

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Re: Should I lend money to family?
« Reply #10 on: October 28, 2016, 07:11:38 PM »
No. Lending to family or friends is never a good idea. You are last in line to be repaid, if ever. Also, instead of gratitude, there's typically immense resentment that you are now their lender, not their benefactor.

Banks exist for a reason. You are not a banker. If your relative or friend cannot make a bank happy, you cannot expect a good outcome.

Any transfer of money should be considered a gift, because it's highly likely that's what it will be. If you cannot afford such a gift, do not do it, especially if your relative threatens to be mad about a refusal.

ender

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Re: Should I lend money to family?
« Reply #11 on: October 28, 2016, 08:38:54 PM »
So my brother needs help with adopting a child. He and his wife asked me for a loan of about $7000 last year for their house and paid it back in less than a year. I don't know if I'm in a situation to help out or not. I have about $4500 in savings. I think they think I have more money than I actually do of that makes sense.

If I can't give it to them they have to get it from somewhere which means my parents. They're draining all their resources to do this. So I don't know what to do.


You shouldn't lend people money for predictable and understood expenses. You don't just spontaneously adopt someone and need money.




LeRainDrop

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Re: Should I lend money to family?
« Reply #12 on: October 28, 2016, 08:48:10 PM »
They don't have enough money to adopt a child.  You don't have enough money to make a loan.

Villanelle

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Re: Should I lend money to family?
« Reply #13 on: October 28, 2016, 08:52:16 PM »
I know the standard answer is "hell no", and I agree that most of the time it's a bad idea.

But I've seen it go very, very well in my family, and I think all parties have benefitted.  The first house DH and I purchased was my paternal grandmother's home.  It happened to be in the city where DH and I have recently moved as newlyweds.  Dad knew we were interested in it, so he arranged to take it has his part of his inheritance (paying a small but to his siblings, I believe, because the house value was slightly more than his 1/3).  We then bought the house from him, and instead of a conventional loan, my parents were our mortgage holder.  We made it very official, with a set interest rate and payment schedule and a lien on the property.  It was very clear to all parties that this would be treated like a regular loan, with no "oh gosh, we were short this month, so we are going to skip it...". 

Technically, I believe my parents would have been okay if we'd walked away, but this was $200,000ish, so certainly this did meet with the typical, "unless you are okay not getting it back..." protocol.  My parents knew us to be respectful and responsible.  Also, they would be first to be repaid, not last, if for some reason we couldn't afford everything.  But we bought far less house than we could have afforded, and were generally always pretty good with money, so they had very little reason to worry. 

In this case, however, these people want a loan in order to take on something that creates a significant amour of expense.  Their finances will get *worse* as a semi-direct result of this loan.  And you only have $4500 in savings.  Unless you actually have 6 figures in investment accounts and you just aren't counting that, you are in no position to loan or give anyone money.  So in this case, I do think it's an awful idea.  I'd simply tell them that things are tight for you right now and you can't afford another loan. 

calimom

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Re: Should I lend money to family?
« Reply #14 on: October 28, 2016, 10:33:30 PM »
Can you keep the baby as collateral if they don't pay you back?

Dmy0013

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Re: Should I lend money to family?
« Reply #15 on: October 28, 2016, 11:24:13 PM »
If you had a 100,000 in savings I would feel different... You are opening yourself up to risk by giving them basically your E Fund...

Im not saying I would not do it... Im just saying its a tricky situation I guess...

worms

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Re: Should I lend money to family?
« Reply #16 on: October 29, 2016, 12:45:47 AM »
Can you keep the baby as collateral if they don't pay you back?

My experience suggests that, in cash terms, that would not be a good trade!

EricL

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Re: Should I lend money to family?
« Reply #17 on: October 29, 2016, 12:58:20 AM »
No.

former player

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Re: Should I lend money to family?
« Reply #18 on: October 29, 2016, 02:49:13 AM »
You lent your brother and his wife $7,000 last year for their house purchase and they paid it back. So why do you only have $4,500 in savings, when you should have that $7,000?  OK, you are not giving us the whole financial picture, that's fine, but of what you have said I'm not sure I understand.

If your brother could save $7,000 in the first year after buying a house and pay it back to you that does suggest to me 1) he was responsible in how much house he bought and didn't overcommit himself (ie he was short of capital because the mortgage amount was less than he expected, but has sufficient income to cover his expenses with enough to spare) and 2) he took the obligation to pay you back seriously.  I like this brother of yours (fond of my own brother too).  So while your brother is temporarily out of available capital but has proven himself responsible with money.  I understand (never done it myself) that adoption is a tricky and expensive process, but that for a childless couple to bring a child into their lives can be a wonderful thing for both them and the child.  Your brother hasn't had time to build up enough capital yet after the purchase of the house and paying you back in the last year, also understandable.  So I'm sympathetic.  Helping this adoption would help to bring a new niece or nephew into your life, which could be life enhancing for you and the rest of the wider family too, so there is a potential direct personal benefit for you as well (or not, of course, if you have personal feelings against adoption and kids).  Those are the things which can speak in favour of the loan.

Now, reasons against the loan. 

1)  You need to put your own lifebelt on first.  This is one of the things which seems to be concerning you: you don't have much spare cash at the moment for whatever reason, and you may have need of this couple of thousand or so for yourself before it can be paid back.  All you can do on this one is take a reasonable look forwards over the expected payback period and list the reasons you might need the money.  If it looks reasonably likely that you will need it yourself for expected expenses (eg moving and need a deposit, school fees to pay) or you need a safety amount on principle (car might crap out and need expensive repair or replacement) then you have to say to your brother "sorry, I'd love to help, but I've only got enough to cover X which is coming up: it's bad timing for me and otherwise I'd have loved to help".

2)  Your brother can't afford it.  Adoption is expensive, children are expensive.  There is the capital expense of adoption, and the running costs of a child in the house.  If the running costs of the child are within budget I would be less concerned about helping out with the capital costs.  You already have evidence from the previous loan payback that your brother seems to have at least $7,000 to spare in his annual budget.  That's not bad in the first year of house ownership, but whether it's "covers the first year of an adopted child in the house" money I don't know, and I don't suppose you do either.  I think you need a financial plan from him before you go ahead with any loan.

3) Whatever you decide, you need to make your brother aware that your own financial circumstances are circumscribed (eg you've been paying off debt, you are looking to move jobs, you want to save for a house) and that interest-free loans to him cannot be a habit because you want to get to the position he is already in and have your own home.

radram

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Re: Should I lend money to family?
« Reply #19 on: October 29, 2016, 07:30:16 AM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.

You give these reasons for not loaning them the money, and then still suggest you are going to do it? Forgive me for sounding harsh, but you are sounding like a troll. If you know what to do, and don't do it anyway, you have no business on this forum. We are trying to give real advice to real people with real problems.

Gift them the money, the second of many, or say no. Have a great day.

bridget

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Re: Should I lend money to family?
« Reply #20 on: October 29, 2016, 08:21:11 AM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.

I think you are taking way too much emotional labor and responsibility upon yourself here. (I say that as a person who has a penchant for such things). The buck does not, and should not, stop with you. You are not in charge of managing your brother's finances or your parents or the finances of GoFundMe strangers. You are also not responsible for shielding your brother in a cloak of family privacy that he does not seem to be concerned with himself. You should not expend your limited funds in such an endeavor, because you are projecting your own Stuff onto the situation.

As an answer to your general question (not specific), I think family loans can sometimes be fine. Our first mortgage as newlyweds was financed by my husband's grandparents. All the paperwork was formalized, and we sent them an automatic payment every month for eight years. We got a better interest rate than we could get commercially, his eighty-million-year-old grandparents got a better return than the CD the cash had been sitting in. Win-win. Your situation is the rule, not the exception.

FIFoFum

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Re: Should I lend money to family?
« Reply #21 on: October 29, 2016, 10:56:05 AM »
There are two problems here - adoption is REALLY expensive and you don't have enough money to give them. So they are going to drain resources beyond what you have anyway (and not be able to pay back anytime soon, if at all).

There are no guarantees that spending a lot in the fees will actually result in a successful adoption either. It can turns into a black hole of fees, and it (sadly) is structured to take advantage of desperate wanna-be parents and serve as a means-test to funnel adoptable children to more wealthy people.

A few thousand dollars IS just the start of it. That's not even getting into the actual cost of supporting a child. Giving them what you have won't stop them from asking or leaning on others, like your parents. So I would just take it as given that this will happen whether or not you give them your money.

Beyond that, no one else can tell you whether you should prioritize giving to family over your own personal goals and financial health.


 

cchrissyy

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Re: Should I lend money to family?
« Reply #22 on: October 29, 2016, 01:21:27 PM »
If your own finances were very secure, and you could give them a loan with all the positive feelings of helping them out and not worrying about getting repaid, ok cool, I get why you'd do that. But you don't really have enough money to do this. the honest thing to do, to protect yourself and set the record straight with these people, is to say "I wish I was in a position to help you but I don't have that kind of money. Sorry but I have to build my own financial security right now."

radram

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Re: Should I lend money to family?
« Reply #23 on: October 29, 2016, 02:14:09 PM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.


You give these reasons for not loaning them the money, and then still suggest you are going to do it? Forgive me for sounding harsh, but you are sounding like a troll. If you know what to do, and don't do it anyway, you have no business on this forum. We are trying to give real advice to real people with real problems.

Gift them the money, the second of many, or say no. Have a great day.

I don't know what it was about my post that bothered you, but I certainly have no intentions of "trolling" this forum for answers nor do I feel like this is not a real problem. I feel stuck between a rock and a hard place and have been given great financial advice on here before so that's why I chose to post. And no I haven't made up my mind about what to do and just chose to post anyways.

Maybe I'm not great at explaining my situation very well so that people understand everything but I definitely am not on here to vent or find sympathy. I guess I should have left my personal opinions/aggravations out of it, you all don't need that to help you evaluate my dilemma. These are just my thoughts on the matter right now in trying to decide what to do.
But that is exactly why my post was so harsh(I will clearly admit too harsh). If you are asking for FINANCIAL advice, your own comments stated they can not afford it and neither can you. There is your financial answer right there. I believe you are asking for much more than that, something that a stranger on a forum can not help with.

I do not think you ARE asking for financial advice.  It is clear that financially the answer should be a clear no, by YOUR own postings, not the postings of others on this forum. You are asking if you should do it anyway.  I do not think we can help with that. FIfofum has a great reply of this subject a few posts back.

I think the loan idea is disastrous, but in my opinion so was the last loan to them you had success with. If you do it anyway, I would make it clear that this is a 1 time gift with no expectations of payback. If this 1 time results in an adoption, all their money will go to raising their new child.  If it does not result in an adoption, they will need all they have to try again, because they know they can not come to you.

I am trying to think of a person in the world that I would do this for.  I can not, with the exception of my own daughters (no still too young). No chance I would turn it into a loan, and also no chance I would forgo my FIRE status for a child for them. Even less chance if it was not excess funds. 

Something else.  If someone I knew went out on a limb for me like you did for them, and the result was I now own the house of my dreams,  I do not see how I could even think about asking them for another penny again.  Did the asking come easily? If it did I would remember that.

Keep us posted.

LeRainDrop

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Re: Should I lend money to family?
« Reply #24 on: October 29, 2016, 02:39:31 PM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.

The more detail you add in this thread, the more emphatic my NO answer becomes.  They're going to do it no matter what?  Then they obviously don't need money from you.  Your parents have boundary issues with telling their other child "no"?  That's their problem, not yours.  If you are saying that the entirety of your savings is just $4,500, then you definitely do not have enough money to be able to make a loan to them in the $1,000+ range.  I know it sucks to feel guilty about this, but it's really in poor taste for them to put you in that position.  None of this is your problem to handle.

FINate

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Re: Should I lend money to family?
« Reply #25 on: October 29, 2016, 02:53:35 PM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.

I think you are taking way too much emotional labor and responsibility upon yourself here. (I say that as a person who has a penchant for such things). The buck does not, and should not, stop with you. You are not in charge of managing your brother's finances or your parents or the finances of GoFundMe strangers. You are also not responsible for shielding your brother in a cloak of family privacy that he does not seem to be concerned with himself. You should not expend your limited funds in such an endeavor, because you are projecting your own Stuff onto the situation.

+1

I'm not generally a fan of psychobabble, but I will use it here because it's the best way to describe your situation: Co-Dependency. Although often described in the context of substance abuse, it frequently surfaces in otherwise functional families and is fairly common in the US. Characteristics include: An exaggerated sense of responsibility for the actions of others. A tendency to do more than their share, all of the time. An extreme need for approval and recognition. Problems with intimacy/boundaries. Lack of trust in self and/or others. A sense of guilt when asserting themselves. Etc.

You need healthy boundaries with your family. They make their own decisions, and these don't reflect on you nor are they your responsibility to control or fix.

MrsDinero

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Re: Should I lend money to family?
« Reply #26 on: October 29, 2016, 03:23:54 PM »
I guess my dilemma is that they're going to do this no matter what. They're already well into the process and are just relying on other people (my parents, me, GoFundMe) to jump in if they happen to come up short on money or I guess the agency will reject them if they can't come up with it. Do I agree with them having a child? No. They would be amazing parents but they just can't afford to. But they're going to do it regardless of their financial situation and it's hard for me to keep my mouth shut about them asking my parents for money because my parents can't say no to them. I'd almost rather drain my savings than get anyone else involved. They're not asking for much right now, a couple of thousand. But this is just the start of it and I'm so afraid I'm going to be helping this child financially forever.

If they are going to do it regardless if anyone else helps out, then you are morally off the hook for any financial assistance.

One of the main things about being a parent is BEING A PARENT.  This means the baby is 100% their responsibility.

If you feel the need to contribute then do it after the baby is born.  Babysit on a regular basis.  Buy them a stroller, pay for gymnastic lessons, or school supplies. But the cost of actually bringing a baby home is 100% on them.

Villanelle

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Re: Should I lend money to family?
« Reply #27 on: October 30, 2016, 12:56:06 AM »
It's noble and honorable of you to want to try to shield your parents.  However, they are adults and are responsible for their own choices.  And perhaps more to the point since you are struggling with drawing a healthy, comfortable boundary, there's very little reason to believe that your money won't simply be sucked up into your brother's life, along with whatever they can get from your money.  So your loan (gift, donation, whatever) is pretty unlikely to stop your parents from emptying their wallets if they are so inclined. You can't prevent that, or at least you can't prevent it buy throwing your wallet up as a barrier between your brother and your parents.  If you want to help them, consider discussing finances with your parents, but even that isn't likely to go very far if they aren't interested in making a change. 


neophyte

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Re: Should I lend money to family?
« Reply #28 on: October 30, 2016, 08:08:59 AM »
My cousins have adopted two children. While I'm not privy to the exact costs, I believe each child was in the range of $50,000-100,000. The more complicated baby may have even been more than that and the adoption nearly fell through at the last minute. 

Your $4500 will go a long way helping you recover from unexpected car repairs or illness. It will be a drop in the bucket for adopting and raising a child. You really can't afford to help them with this right now.

SeaEhm

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Re: Should I lend money to family?
« Reply #29 on: October 30, 2016, 08:51:38 AM »
It seems that if they could pay you back in a year, then they should be able to save the $ needed in a short amount of time. This is unless they are getting into the habit of robbing Peter to pay Paul.

I don't know their personalities, but I get worried that they want to throw a child into the mix when many people state that financial issues are the number one cause of divorce.

Indexer

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Re: Should I lend money to family?
« Reply #30 on: October 30, 2016, 04:12:50 PM »
I would consider making a gift in some circumstances. Loans are probably not a good idea.

+1

Even if they want to call it loan assume it is a GIFT. If they actually pay you back, yippee, they gifted you money back! For your sanity and relationships you can't actually think of it as a loan.

SwordGuy

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Re: Should I lend money to family?
« Reply #31 on: October 30, 2016, 07:53:48 PM »
I know they would pay it back and the reason they borrowed the other money from me is because their appraiser screwed them.

Seriously?   

Were your relatives claiming that the appraiser was someone who hated them in high school and this was the appraiser's chance to get even?   (That would be my attempt at a joke.)

Appraisers are normally total strangers to the borrower, who are hired by the bank to do a job according to fairly standard criteria.   Any realtor worth their salt will come up with a similar number most of the time.

Claiming the appraiser "screwed them over" is a BIG red flag to me.   It sounds like a rationalization designed to blame others for their problems instead of their own decisions.

 Just say no.   They need to be adults able to raise that money by their own work or they have no business raising children.

LeRainDrop

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Re: Should I lend money to family?
« Reply #32 on: October 30, 2016, 08:03:39 PM »
I know they would pay it back and the reason they borrowed the other money from me is because their appraiser screwed them.

Claiming the appraiser "screwed them over" is a BIG red flag to me.   It sounds like a rationalization designed to blame others for their problems instead of their own decisions.

Oh, right, I thought the exact same thing as SwordGuy but then forgot to comment on it earlier.  It is a red flag as to the brother's mindset.

dunhamjr

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Re: Should I lend money to family?
« Reply #33 on: November 05, 2016, 12:05:53 AM »
The quick answer... No.  Do not lend to family.

But.
If you want to lend them the money to help them, only lend what you are 100% willing to never see again. And once the money is lent, do not pester about nonpayment.

Even then. Problems can happen.

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