what conditions would you put on lending someone money

Why do they need the money?
from what you say, the husband is a high earner.

Sounds as if they are living beyond their means, and lending them money will only prolong that.

Only consider if a life or death health emergency.

We have loaned money to our kids to tip them over the line when buying their first property. Less than $6K. Paid back tho we didn't really expect them to.
Marg

 

I've leant money to a few friends and they've always paid it back. Between $20k - $50k. My criteria could be described as follows:

1. They didn't ask for it, nor did they expect it.
2. I could afford to loose the money.
3. They had the capacity to pay it back quickly, as well as the desire.
4. I trust their character without question.
5. The money was for a real asset, not a whim.

Realistically most people who I believe meet these criteria probably don't need to borrow money, but I've had a few friends who where purchasing a property, something out of their control changed and some extra funds solved the problem.

 

Justine, the problem is that the people you are talking about would not be borrowing money for a particular purpose. They don't need it for a deposit on a property or anything like that. They just need it to make the hole they have dug themselves into a bit less deep. There is no reason for you to think the money will come back to you or that it will someway make them change their ways. If anything, it might reinforce them because somebody has bailed them out. It won't take long for them to start digging again.

 

Completely agree with @Depreciator. My experience with consolidating personal loans and credit cards for clients is that 2 years later they're coming back for more because they haven't changed a thing.

Someone who needs help to dig themselves out of a hole has only proven that they make consistantly bad choices. They need to help themselves first before others can.

 

I have had 3 experience's with lending money to family and in a I will never never do it again.
If you are happy to give the money to them than that's a different story,but borrowing money and family don't mix period!!

 

Totally true ... having learnt the lesson I do not lend money the kids ... if they need some extra for a specific purpose then we simply "give" it to them with no expectation of it coming back ... therefore I don't feel cranky because they're not holding up their end of the deal, and they don't feel trapped because they have to chose between paying back stepmum or buying those awesome new shoes.

 

OP feel for you, but they need to learn....

As long as they have basics for kids they are fine. when they do hit rock bottom (and they will) then help them by not giving them money but by buying basic things they might need then. Hopefully the situation of hitting rock bottom will give them a reality check they need.

 

Financial counseling - not one of those mobs who charge an arm & leg for what should be a freebie.

 

Its a No form me. Nice to help and probably gives you a really nice feeling up until some general comments are made that are questionable !

 

In @justine77 situation it's a no. A big fat NO

However I did lend money to my brother this morning. He is setting up his own company to be self employed and I knew he'd need some money to get it off the ground. I offered - he didn't ask - he refused - then 24hrs later after doing all his sums he came back to me and said 'you were right, I need some help'

I transferred the amount of money he asked for plus $1k extra and told him I don't want to see it paid back until next year as I want him to concentrate on getting the business off the ground and that all new businesses have to wait for people to pay them etc etc so the extra $1k is in case he needs it whilst waiting to be paid.

He's a good sort though, hates debt, doesn't have a credit card etc. And is already planning to pay me back early even though I've told him not to!

 

THANK YOU for all the experience I read every single response and i will read them again.

they want the 8000 as then they say their loan will be 25000 and that then they can attempt to get some interest free loans that they might be able to get instead of paying some 400 a month in interest and not being able to ever get ahead.

8000 in a very lot for me
i need every bit of security and savings i have for my future security and unknowns and there are many unknowns in my situation.
and i have no guarantee how well they would use this leg up
and what will happen in the next year that could make me really regret taht i really need it
plus if i have my very bit of valued security given to them, and then have to watch them overspending on lots of expensive new toys for christmas and birthdays etc when there are tangible ways to save more, i think it would be hard for me and hard for me not to say anything and i dont want relationships breaking up and huge stress from me causin them stress about things that the partner is not able to cope with lowering standards for to get out of debt

personally i dont know how some people spend while being in debt but some do and i dont know if i can be connected to that as it stresses me.

i dont think i can easily switch off from this

i think i'll always be wishing or considering what would happen if they got a leg up of 8000 woud they then succeed in getting interest free loans and bringing it down or every year would i watch them spend on expensive christmases and birthdays.
its hard for me to watch them suffer or overspend and its possibel that the husband is working so hard on a low wage and that he knows he cant change his partner in some standards she has.

 

No. I don't know the people in your example, but I know people like them. He worked for several years FIFO in the mines, blew out his ACL in his knee in a quad bike accident showing off to his young kids one trip home. Unable to return to work because of said bung knee and morphine addiction to kill the pain. That was 3 years ago. She still spends like they're on the same money. Breeding more kids seems to help their income though. . . .

To "lend" your friends money would be further enabling their proven poor track record for overspending.

 

As someone from a low-socio background... I'm telling you straight up you can't do this. It will destroy your relationship.
Financially and emotionally it is just not worth it. I'm speaking from experience.

There's 4 possible scenarios here.
You give them the money and they're OK for a while. A year later they're back in trouble.

You give them money and they did themselves out of trouble - very unlikely - this is simply not how humans work. Even if this does work, your life will be seriously pit out as 8k missing will slow your plan down.

You don't give them money and they stay in trouble.

You don't give them money and they sort themselves out by themswlves.

Of all the options the last one is by far the best

It involves you NOT lending them the money.

 

Nope nope nope nope.

"Sorry, something has suddenly come up and has wiped out my spare cash. I'm really sorry".

Otherwise I would tell them I would cut off their legs if they didn't pay it. And I've cut off many.

 

Big no.
Lend it and you will ended up resenting them no matter how well they do.

@Bran lol, I am guessing no one would ask you for money unless they are really in pinch then

 

I would point them to My Budget or similar service to help them get back on track.

MyBudget - Australia's Personal Budgeting Specialist

If they haven't seen those adverts a million times on telly then they must have Foxtel and you can tell them that's the first thing to get rid of.

 

Interest free loans? That'd be the day! 1 late payment and it's all bets are off.

They stand no chance. Nor does your money in their hands.

 

I personally too would say no- 25k isn't a huge amount of debt to service. If they budgeted and went without they could clear that in two years easily. We previously had a tax debt that we thought we would never be able to pay off, until we realised our house was on the line. The tax office put us on a $2600 a month payment arrangement which we thought we could never afford along with our mortgage,and bills however we managed to pay off nearly 70k in 24 months and we are on an average (or low compared to most average) combined income.
It is amazing what you can save when you have no other choice. I wouldn't help them because it's not going to teach them anything, they won't bother getting interest free loans and even if they do they won't increase repayments by 400 a month to make any difference.

I'm grateful for our tax debt mistake- it taught us so much about saving and made us realise how wasteful we were.
I'm also extra appreciative of my credit rating now,and am now the most punctual bill payer I know- when I was a younger I got myself defaulted by getting too many stupid things I didn't need and couldn't afford, and it cost me my credit rating for 5 years- I'm still paying for this mistake now!

I would just tell them you can't get the money- sorry!
However;
If you really really want to help them maybe say okay, if you are willing to pay x (min repayments) amount off the existing loans each month, I will give you the 400 a month to cover the interest- then they can't complain about paying high interest and they can make a bigger dent in the debt by paying the same repayment the were originally, and you can't lose so much so quickly.

 

Citizens' Advice Bureau or local community legal service for free or cheap financial counseling.

Stay away from those people who advertise on TV ( a rip off according to something I saw on the ABC).

I also think you need some support too. Are they bullying you or trying to manipulate you into the loan?