Don't Be Ashamed To Ask Friends Or Family For A Loan

Taking a private loan from friends or family can be a win-win proposition, not necessarily a shame-filled dish with a side order of failure. Private loans are an ideal way to reduce the amount you need to borrow from a bank—instead of paying loan application fees, processing fees and higher rates, you can save money while offering attractive yields to your friends and family.

Three USA Today money columnists argue that the key is structuring the deal so that everybody wins:

…if you are looking at mortgages with interest rates hovering just below 7 percent while your parents are struggling to find a CD or other safe investment that pays more than 5 percent, you can satisfy everyone’s needs by structuring a private loan in which you make monthly repayments at 6 percent.

If you still blanch at the thought of asking for a private loan, approaching it as a business proposition may be a wise strategy. Suggest setting up a time to talk, even if you see your parents (or brother or old roommate) regularly and the formality seems odd.

If you get a positive response, prepare a one-page list of things to discuss, including how much you want to borrow, the interest rate you’re offering to pay, your proposed repayment schedule, the legal and financial protections you’ll offer to the lender and how much you have available for the down payment for the item you are looking to finance.

Of course, money issues can ruin relationships. This is only a viable option for financially mature people who are confident they can repay their loan, and are looking to do more than pay off last month’s credit card bill. If you like the idea of bypassing banks but don’t want to potentially sully your close relationships, consider person-to-person lending through Prosper.

Hitting up family, friends for a loan [Mercury News]
(Photo: Getty)

Comments

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  1. TechnoDestructo says:

    Considering how banks are trying to dump least profitable what…90 percent of the population, this may soon be the only option for nearly everyone.

  2. Half Beast says:

    I was always afraid to ask my folks for money. I remember when I first went to college, I had always interpreted the fatherly “If you ever need anything, just ask.” as “I swear to God if you call asking for money, I will mail both a check and an ass-whoopin’.” When my sickly car’s engine decided to blow up back in 2002, I learned that their offer was indeed genuine. One of the few advances I have paid back with a smile.

  3. forgottenpassword says:

    Yeah, I just LOVE i when my family members/friends ….who make more than I do,live better than I do, but dont save anything & live beyond their means & in debt… come crawling to me to borrow money!

    Screw em!

    People like that never learn.

  4. homerjay says:

    Are you kidding? The best way to turn a friend into an enemy is to borrow or lend.

  5. kenblakely says:

    Borrowing from or loaning to family and friends is a really bad idea, full stop. Once money gets involved, the relationship is irrevocably changed. It’s hard to believe Consumerist would recommend this…..

  6. matt says:

    Never speak to my brother again orrrrrrrrrrrrr get a loan I’ll never be able to pay off?

    I think I’ll take door 1. Fuck my brother.

  7. endersshadow says:

    I’m gonna go ahead and say that intrafamily loans are a really, really bad idea. While it may make economic sense now, it does not make interpersonal sense. Your relationships will be ruined, since it’s never comfortable once you have to see somebody you owe money to a lot, no matter how good you are at on time payments.

  8. Benny Gesserit says:

    @forgottenpassword: Frugal and holier-than-thou. That’s quite the combo. You should ask yourself if those people you called “friends” think of you as one.

  9. BlondeGrlz says:

    I borrowed $5000 from my parents when we bought our first house. We wrote out a promissary note, agreed to pay half in six months, half within 12 months.The asking part was the hardest, but paying it all back early felt great. I think it depends on whether or not the person you’re borrowing from can afford to make the loan in the first place. And get details in writing or you’ll end up on Judge Judy.

  10. juri squared says:

    Not to mention that informal loans don’t ding your credit.

    As for relationship problems, it depends on your relationship. There are very few people on my ‘would lend to’ list and they’re pretty much the same people on my ‘would borrow from’ list.

    That said, we’ve discussed borrowing money from my mother-in-law in the past. She keeps a ledger of how much her kids owe her, and is very organized with it. If we were to do that, we’d just set up a monthly auto-debit schedule and there would be no worries with late or missed payments.

  11. DePaulBlueDemon says:

    No! Lend money to a friend and collect it from an enemy!

    My mother lent a very large sum of money to my brother-in-law so he can start a business. It has irrevocably strained the relationship between everyone involved, including my sister and my mother. I would NOT recommend this to anyone!

    Very bad advice, Consumerist!

  12. ninabi says:

    Ways Other Family Members Have Spent Family Loans Needed Urgently

    1. vacations

    2. gambling

    3. pricey summer camps for their kids

    Yes, we have some safe loans- I gave my mother money for the down payment on a condo. Family can sometimes mean “subprime” and be prepared for a write off.

  13. GearheadGeek says:

    They were quite specific at the end of the posting to say that this is only an option for the financially mature. I’d change “financially” to “completely” but the net meaning is nearly the same. My mother loaned me money to do some improvements on our new-old home before our previous home sold. I didn’t make a dime off the previous home, unfortunately, and Mom and I agreed to a fixed-rate amortized payoff through which she’s making more than CD rates then (WAY more now, just a few months later) and I’m paying less than I would’ve paid for the money with 2 mortgages (the situation we were in at the time.)

    We agreed to a 15-year schedule that I’ll probably have paid off in 5, but if unforeseen problems come up it’s still very likely I can keep up more than the required payments, and everyone’s happy.

    This is DEFINITELY only something for people who can treat the loan as a strictly-business transaction independent of the family ties… I won’t ask Mom to just forgive the loan, and she gets paid before I buy toys or go out for dinner. That’s only fair, and it’s the only way to make this sort of thing work.

  14. forgottenpassword says:

    @Jim (The Canuck One):

    I am only holier than thou to those who are foolish enough to make foolish decisions (like racking up insane amounts of credit card debt or buying an ourageously expensive house they cant afford) . Life’s tragedies (like getting diagnosed with cancer etc. etc.) that are often beyond someone’s control is a whole other deal.

    My friends/family know I have no (or very little) debt & save my money (how can they not? I am not throwing it around like a drunken sailor like they often do…. I also never go running to anyone to borrow money. You have no idea how many have come to me to ask to borrow money because of their own foolish decisions…. its rediculous. Loaning money to people who are notoriously irresponsible with it in the first place is just not wise ….it enables them to keep doing so. ANd they will again be back to ask for more.

    I have sacrificed greatly in my life so I could NEVER be beholden to anyone (perfect example…. this last year, I worked 7 days a week for 5 months straight at my job with no days off, because it was a fantastic & rare opportunity to pad my savings)…. how can I have any respect for those who care more about how many nice things they own & how they superficially rank in the eyes of others & then come crawling to me to prop them up in their outrageously foolish/expensive lifestyle decisions?

  15. Feminist Whore says:

    If you have it to loan, give it instead. More specifically, give it to me.

  16. RumorsDaily says:

    @forgottenpassword:

    Please give more details about your friends… full stories. I find this entertaining.

  17. I’ve both borrowed and lended: in my struggling college days, I borrowed from my folks and always paid them back promptly, with interest; and I’ve lent money to very good friends and family members — I don’t recommend it. I agree with you guys above; it really does change the relationship in a negative way.

    Once you lend money to someone you know, the dynamics of the relationship inevitably change. If the borrower isn’t responsible and starts to flake on the payments, no matter how nice you are about it, YOU are made to feel like the bad guy for trying to collect. What follows? Excuses, manipulation, recriminations, name-calling, and finally the point of no return is crossed: the borrower bails or reluctantly pays up, but the damage is done. The relationship is ruined forever.

    I don’t lend money anymore. It’s not worth the headache.

  18. Copper says:

    For some, it’s a good idea, for others, it’s a bad one.

    My mom loaned me and my fiancee $5000 for our first car because the bank gave us a really bad deal on it. It’s been about a year so we’re 1/3 of the way done. It’s great because I feel a sense of accomplishment and I don’t feel upset about paying the interest because she’s my mom. I wouldn’t do this with anyone but my parents. Also, paying on time sets me up with a good record if I ever need her help in the future.

  19. Crazytree says:

    Lending money to family members is the absolute worst possible financial decision one can ever make, period.

    There is a very high liklihood you won’t get paid, and when the deadbeat relative falls behind in payments, you’ll be treated like a jerk for trying to collect.

    Eventually the deadbeat relative will try and shame you into non-collection.

  20. MercuryPDX says:

    @alphafemale: That’s my opinion as well. You should never “loan” money to family or friends with the expectation that it will be paid back; give it freely or not at all. I’ve seen friendships and family relationships damaged over amounts less than $1000.

    If you DO decide to loan money, act just like a bank would:
    1. Get it all in writing – Amount loaned, interest, payment schedule including all payments made and missed.

    2. Don’t loan out more money to someone who already borrowed some from you and hasn’t paid it back yet. The odds are good that they will never pay you back.

    Loaning out money to family and friends is a bad idea that rarely works out to a happy ending for everyone involved.

  21. HaloZero says:

    I think the fact that your even asking interest from a family member is kind of insulting. I mean if I needed to borrow some money from my parents I wouldn’t want them charging me interest, WTF?

  22. samurailynn says:

    I typically only lend money that I never expect to see again.

    I don’t like borrowing money from people either. My husband and I have had to borrow money from his parents a couple of times (mine don’t have it to lend). But it’s always been an extremely uncomfortable situation as his dad will tell us it’s fine, and not to worry about when we can pay it back, but then his mom will whine to one of us about how they can’t afford to eat because we owe them $100. It’s an all around ridiculous thing for her to say anyway, considering they own a 1.5 million dollar house, and pay for all of his sister’s cars, insurance, groceries, spending money… etc. But when my husband and I were just barely struggling to eat and had to ask to borrow the money because someone tried to break into his car and broke his window, we are the ones draining them of their wealth.

    This all happened years ago, but it left a big impression on me – don’t borrow money from people who aren’t generous.

  23. samurailynn says:

    By the way, the total that we owed them was $100, not payments of $100.

  24. spinachdip says:

    @MercuryPDX: I agree with this – don’t lend if you need the money back, and if you don’t need the money back, then you can afford to give.

  25. SOhp101 says:

    To people who are loaning money:
    1. Unless you want your relationship to sour, don’t expect them to pay it back.
    2. Get it in writing.

    To people who are borrowing money:
    1. Unless you want your relationship to sour, you’d better pay them back before your other obligations.
    2. Whoever lends you the money probably will not charge you interest, so you’d better take them out to dinner or do something really nice in return.

  26. K-Bo says:

    @HaloZero: I on the other hand would feel like the worlds biggest spoiled brat to accept a loan of more than $100 from my parents without paying interest. It makes up for the money they are loosing because it’s not earning more being invested somewhere. That said, on the smaller loans, my parents usually ask for their repayment in services, such as having me do their Christmas shopping. It might not leave them in the end with as much money as they would have had if they hadn’t loaned it to me, but my mom hates shopping so much its worth it to her. Sometimes I think she looks for ways to loan me money so she can get out of shopping.

  27. MercuryPDX says:

    @Jim (The Canuck One): I honestly don’t see how you can call him out for this.

    You must have never lent money to someone for something they needed (Rent, bills), only to see them continue to go out drinking in bars or eating dinner out multiple nights a week instead of a) Paying you back or b) Realizing that a social life should not trump their responsibilities.

    This is not to say that you should become a hermit, but if you’re conflicted between paying rent or spending $150 on dinner and drinks every weekend you have a lot of growing up to do. Lending money to someone like that is only enabling their bad behavior to continue, not teaching them the life lesson they should/would be learning if you were not so generous.

  28. youbastid says:

    Wow, consumerist. First, you confuse people with a terribly worded post that makes them think the $600 check from the IRS is really an advance on their 2008 return (which it isn’t), and now you’re trying to destroy families. Pretty awful advice for a consumer advocacy website. Maybe it’s just cause it’s the weekend?

  29. youbastid says:

    If you want to forgo the banks and not become estranged from your sister, try [prosper.com]

  30. nevergod says:

    never loan someone in your family or friends money that you care about getting back.
    because if you do, you’ll probably end up not being friends.

    this is certainly not something i would expect from the consumerist.

  31. thalia says:

    No offense, but when you lend money to a friend, you collect it from an enemy…if you collect it at all. And I can vouch for that.

  32. forgottenpassword says:

    @RumorsDaily:

    Ok, here’s a couple.

    My sister who spends copious amounts of money on clothing, makeup, & every other thing that her idiotic in-debt friends do …. just so she can keep up with them. This gets herself inserious debt to a number of credit card companies. She lets it slide until collectors are harrassing her at work & threatening her job. She comes crying to me to bail her out because the shit has finally hit the fan. I loan her one third of my then HARD-EARNED savings (keep in mind… she made a bit more money than I did in her job, but she saved none of it) interest free & give her a 5 year timeline to pay it off. I get maybe $2,000 tops back in those 5 years, meanwhile she had STILL been living beyond her means off of other credit cards. She gets into even MORE debt & then comes crying to me AGAIN to loan her more money. I told her she could keep the money she still owed me, but I wouldnt loan her any more because she was irresponsible. just as simple as that. I am not going to throw away my hard-earned money because she lives irresponsibly.

    My best friend. This is what he did. He has had hardly any savings & never really did all his life. He buys a small house with prettymuch no money down, goes out & buys a bunch of expensive home furnishings & electronics to furnish this house. Racks up credit card debt in the process. Pays on his house a few years then opens an equity line of credit on it, pays off some credit card debt & then uses the rest to go on a vacation to england. He then goes & buys a BRAND NEW truck (when the 0% down financing craze was happening at that time), pays on it for a while. Gets fired from his job (because he fucked up), gets another job & I, being the friend, vouch for him at MY job so he can get a part time job there to help pay: 1.credit card debt
    2. payments on a vehicle he cant afford
    3. higher mortgage payments on his house because he refinanced & got an equity loan

    ….. in which he completely SCREWS me by being an idiot at the job I got him & gets fired. My boss is then pissed at ME for vouching for him, luckily my longtime responsible/relaible reputaion at my work saves me.

    Then this miserable SOB has the balls to ask me to pay off his truck loan (which was double what I bought my used jeep for). So I am going to loan him a considerable amount from my life’s savings to bail him out so he can continue to fuck up more & more? PFFT!

    Keep in mind that this guy makes more than me in his job/s, but puts himself in debt to keep up with his other friends. Of course… he would NEVER bother them for any money, because he needs to save face & he also knows they have no money to lend because they are just as fucked up financially as he is.

    He eventually just dropped off his brand new truck at the dealership he bought it from & still owes money on it, bought a beater, ruined his credit & is currently struggling to make the mortgage payments on his house, while he has, expensive cable, expensive broadband internet & all kinds of other little expenses that add up to a lot in the end.

    I figure unless he changes his ways… he is going to lose his home.

    Am I supposed to help out people who are foolish like this?

    IMO he is a worse friend for continuing to be financially irresponsible & asking to borrow a LOT of money from me than I am for not wanting to take the risk because he is supposedly my best friend.

  33. sleze69 says:

    @homerjay: /agree. This is terrible advice. Never loan money to a friend because that will be the cost of your friendship.

    Giving a friend money is a different story.

  34. quail says:

    There’s far too many emotional strings attached to borrowing money from friends and family, or in lending it. It fails more often than it will succeed. Most economist articles I’ve read on the matter suggest that you don’t lend the money but consider it a gift. If you can’t gift the money then don’t give it.

  35. forgottenpassword says:

    @forgottenpassword:

    And keep in mind, I was not an asshole to these people… I was probably TOO nice.

    I offered sincere,practical advice in an attempt to help them from eventually destroying their lives. Only to have it ignored. And I stop when I realize they dont want it.

    its funny how people think you somehow owe them because you have more money than they do. But what they dont realize is that you sacrificed in order to aquire that money. I am not a millionaire (far from it…. I am in the lower-middleclass bracket).

  36. cmdr.sass says:

    Neither a borrower nor a lender be;
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry.

  37. MercuryPDX says:

    @forgottenpassword: That’s exactly it.

    Am I supposed to help out people who are foolish like this?

    Nope. It’s “Financial Responsibility 101″ as taught by the School of Hard Knocks.

  38. Ben Popken says:

    I’m going to contradict my esteemed colleague and say that I think lending or borrowing from friends and family members is a good way to ruin or strain a relationship.

  39. Since the writers strike, I’ve had countless Industry “friends” –friends who disowned me after I left the Industry to become a teacher– call to borrow money. I’m not holing by breath on getting to back now that the strike is nearly over.

  40. MercuryPDX says:

    @Ben Popken: Schism! ;)

  41. RumorsDaily says:

    Intra-Consumerist turmoil! Could a civil war be far behind? I expect to see ConsumeristBen.com and ConsumeristCarey.com start up to give conflicting advice.

  42. ColoradoShark says:

    @homerjay: I’m from the Suze Orman school. Make it a gift so you can stay friends. My twist on it, if they feel the need to pay it back is to tell them to do a pay it forward thing.

  43. spinachdip says:

    FWIW, I think the post title, but only the title, is good advice.

    You should have second thoughts because you might ruin a relationship or put a family member in a difficult position, but not because you’re embarrassed. If you’re in dire straits, shame shouldn’t be the mitigating factor in any decision. Perfectly responsible, well-meaning people can get into financial trouble, and denying that you need money isn’t good for anyone. And certainly, personal loans are a better idea than going to predatory lenders or playing the lottery.

    Your loved ones should be a viable option, but only as last resort and with considerable amount of thought and preparation.

  44. RandomHookup says:

    I am so glad my 5 siblings are responsible citizens, meaning they have never asked me for more than $5.

  45. loans to family/friends are like rebate checks. don’t always expect the money to get returned; you play with fire expect to get burned

    damn…I should be fucking writing financial storybooks for children

  46. Anonymous says:

    Kind of a ‘by the way’ at the very end of the article, but worth repeating:

    “If you like the idea of bypassing banks but don’t want to potentially sully your close relationships, consider person-to-person lending through [Prosper.com].”

  47. morganlh85 says:

    Judging from the success of those tv court shows, loaning money to friends or family is a HORRIBLE idea. Getting relationships and emotions tied up in contractual obligations is simply an awful, risky idea.

  48. I’ve loaned money to “friends” before and it’s almost always turned out badly. Usually it turns into “Don’t worry, I’ll start paying you as soon as I pay off my other bills” and if you even do manage to collect, it’s after two years of pulling teeth. It’s even better when they manage to buy a new TV or an X-box in the meantime, or even better still when they decided to defriend you and skip town. Might as well kiss the money goodbye.

    If you’re the borrower…what happens if you can’t pay it back? If you value your friend or the respect of your family, you might lose either.

    If you can afford to give somebody some money and you really want to help them, fine, but don’t count on ever getting it back.

    This should be a standard rule in the handbook of life, along with “Never sell a used car to a friend, boss, or family member.”

  49. SammyD1st says:

    Worst… Consumerist… advice… ever.

  50. K-Bo says:

    Last time I loaned a friend money, she went ahead and wrote me 2 checks, each for 1/2 the amount, and we had pre-decided days that they would be cashed. It worked well for us, because I didn’t care what she spent her money on, I knew when I was getting mine, and she knew to have the money there or have an overdraft fee and one mad mad friend. Probably wouldn’t work for large amounts being loaned for long times, but for a few hundred for a few weeks, it worked well.

  51. SkyeBlue says:

    We lent my 22 year stepson $350.00 a year ago November when he lost his job and could not pay his rent. So far he has paid back about $200.00 of it and has since borrowed more, but has not offered lately to pay anymore of it back. A couple of weeks ago he promised to pay it back when he got his tax refunds in, which was last week and gosh, for some reason he has not called or come to visit.

    I know for a fact he HAS paid his friends back money he owes them, guess they are SCARIER than I am! If he’d at least offer to pay it back I’d probably tell him just dont worry about it, but right now I still consider the loan due.

    My husband says not to worry about it, that you shouldn’t loan money out if you are gonna get upset about not getting it back, but to me it is just the right thing to do to pay back money you borrow.

  52. I think we’re talking about two different categories here. First, is the stereotypical “loans” to pay off credit card debt, medical bills, etc. The ones that you’ll never see your money again, cause rifts in the family/friendships, etc.

    What the article might be talking about is mortgages or cars. This has happened with my family a few times, and was always approached as a business decision. For example, when my grandfather wanted to sell his house, his neighbor (a long time family friend) offered a simple contract where they would pay a lease and ultimately own it in 10 years. If they stopped paying, they would only own a percentage of the equity if the house sold on a traditional market.

    If you have some intelligence and approach it the right way, this is a great way to cut out all these “evil corporations” we bitch and moan about all the time here. Its basically the same thing as craigslist of ebay, except you know who you’re dealing with and can judge if it is a sound deal.

  53. eeebee says:

    My husband and I are loaning his parents money to pay off their home equity loan which will be paid back with interest by way of shares of equity in their home. This will allow them to stay in their home and not have to worry about it until they are done with the property by death or nursing home. It’s all being done with a legal contract, a lawyer, title search, a provision to increase the interest rate at certain intervals, etc. and will provide a decent return on our investment too. I think family loans are a great idea but you have to think like a bank and only loan to people that you are reasonably sure will pay the money back and get the paperwork done properly. His somewhat deadbeat brother doesn’t like the idea because it reduces his share of the estate. He fails to realize that if we don’t step in now, there may be no estate as they are house rich and cash poor. You should never plan your financial future around your parents’ estate because you just don’t know what’s going to happen.

  54. sabrinad says:

    Oh boy. I can’t agree with this advice at all, having been in (still in, actually) the position of family banker. I’m willing to guess there are some families whose relationships are strong enough, and whose members are financially responsible enough, to pull off a loan to one another, but it sure ain’t mine, and I doubt it’s the majority.

    The bottom line is really know what you’re risking — and be prepared to lose the relationship with the person, not just the money.

  55. forgottenpassword says:

    @sabrinad:

    lol “family banker” ! perfectly described my situation years ago. Being the only financially responsible one in the family can defintely be a pain.

    One thing I have found out about having money (or just having a nice savings account & no debt) or just being financially responsisble ….. is that people often resent you for it. Family members, friends, coworkers etc. etc.. I dont go around telling everyone I have money, but savvy people figure it out after being around you for a while.

  56. ian937262 says:

    @SkyeBlue:
    You sound very cheap. I can’t IMAGINE being that upset over your son, step or not, owing you $150 more. Just say it out loud. $150. It’s not that much, get over it. He’s not as established as you.

  57. Charles says:

    With my relatives? Hell na. I’ve seen what my parents have been through with my family. My brother doesn’t have a penny to his name and has the IRS (and my parents) knocking at the door of his pockets. An aunt and her two daughters all owe my parents sums of more than a thousand dollars each. Three more aunts and three uncles owe my parents money of unknown amounts as well from up to ten years ago.

    I think I’m the only one in my family with good credit…

  58. savvy999 says:

    If one plans on paying back the loan, even if it’s not a terrific rate or terms, do it with an institution that will report your good behavior to the credit agencies. You’ll save more in the long run (eg., the rest of your life) with good credit.

    If you don’t plan on paying back the loan, then by all means fuck over your parents, friends, whatever. It will take a lot for them to send you to collections and have that eventually get back to TransUnion, Experian, etc.

    This is one of the worst articles I have ever seen posted on Consumerist. Like playing with explosives or day trading, lending or borrowing substantial amounts of money between individuals is best left as a thought exercise, 99.99% of people trying it will screw it and themselves up royally.

  59. shenanigrams says:

    have a few comments on this — i have lent to friends quite a bit. now i only “lend” with expectation it won’t be paid back unless i nag which ruins the friendship (at least for me). so, any personal loan is a grant.

    as for prosper/zopa etc. — i really commend propser on transparency. however, that transparency has revealed P2P loans to be an unworthy investment opportunity. the returns are not there or, more accurately, the returns don’t justify the risk. for an uninsured vehicle to offer the modest returns (and ever-increasing risks given current markets), prosper and zopa are not good places for my money.

    if you really dig into this, you’ll understand why banks behave like the do and why banks have low PE ratios. lending is not easy and people, ESPECIALLY in US, have a terrible attitude toward credit and bankruptcy.

    prosper/zopa could work in countries where credit/bankruptcy still carry a stigma. unfortunately, nobody in such countries in going to put an honest profile online looking for money.

    it’s time to buy yuan illegally (or hedge against US treasury notes) — either will work.

  60. Holleh says:

    My fiance’s father loaned the both of us $1, 500 (AU) towards the end of last year for a car. We were honest and upfront: we might not be able to make payments every pay day, but it will get paid. He accepted that (and doesn’t need the money anyway) and it’s functioning well. A third paid off it already :)

    I agree, though, unless you’re prepared to lose the money, don’t lend it. I made that mistake with my parents. >.<;

  61. dazette says:

    Not a hard and fast rule, and I hope not perceived as off topic, but have you noticed how often money problems seem to run in families with maybe a only a fluke single responsible money steward every generation or so? And then other families where they all seem to have it together—not necessarily rich, but are responsible with money? I’ve seen some marrages go rocky if the lovebirds are raised in these two different types of families with different spending and borrowing styles.

  62. PracticalMagic says:

    Well now, Judge Judy and Judge Joe Brown both say you gotta be a moron to borrow money from family, LOL.
    If you are the person lending, then you’d better get that promissory note signed in hand, and prepare for fireworks down the road.

  63. MisterE says:

    Uuuh. No. Ive been burned loaning money. Yet, I was the asshole when I politely asked for repayment when it was due. From Hamlet by William Shakespeare; Polonius speaking: “Neither a borrower, nor a lender be; For loan oft loses both itself and friend”

  64. zibby says:

    Don’t worry about my family, they’re way ahead of the curve on this one.

  65. dirk1965 says:

    I can’t believe Consumerist would even post this knowing how bad it can turn out. Thankgiving dinner sure don’t taste the same when you’ve loaned out money to family. My odest brother has owed me money for a loan to help his business three years ago. He is still in business, but I have yet to see a dime paid back! DONT DO IT! SHAME ON YOU CONSUMERIST!

  66. zibby says:

    Don’t be ashamed to say “No” to friends or family asking for a loan.

  67. Coder4Life says:

    Horrible advice… Seriously. Do you not watch the court shows on TV.

  68. Eilonwynn says:

    I have had to say no to even close friends – It’s really hard, and sometimes in the saying no you lose a friend anyways. I will loan quite happily to my mother, knowing that no, I may not see the cash again, but I will be repaid in some style – be it her buying something for me that I need at a later date, or helping me move, or whatever. Nothing you say could convince me to loan money to any other member of my immediate family, ever. I barely get paid for working at the family business (which is another AWFUL idea, btw.)

  69. Optimistic Prime says:

    @alphafemale: I would agree. If you can afford to loan it out, and won’t miss it if it won’t come back, then give it. We just did that for my wife’s brother. It was a small enough amount I won’t miss it. The other thing that helps, write the check out to who the money will go to so they’re not tempted to spend it on something else. I wrote it out to the lawyer he needed directly.

    Obviously, this also depends on your family dynamic. Some families are more open to helping out than others.

    Also, another option I haven’t seen mentioned is the repayment can get flexible. I know when I was younger I needed money to fix my car, but I wasn’t making much. My grandfather lent me the money, and I worked it off by doing a bunch of work around the house he was no longer able to do. As an added bonus I ended up getting to see him much more often than I normally would’ve.

  70. anatak says:

    @nevergod: Great point. Sorry, Carey, but so many of your articles seem to fall under the “Bad Idea Jeans” category. This would be one of them.

  71. mac-phisto says:

    i normally side with those saying “bad idea”, but this seems to be a bit different than the “i need cash fast, can you help me, mom/dad/sis/bro” loan. this seems to be more of a structured investment where the applicant approaches their relatives with terms for repayment. in a case like this, i would consider it.

    a big part of the problem i have with the “family lending business” is that repayment is often not discussed beforehand & everything is done on a handshake. most of the ill-will is really caused by a lack of communication between the two parties about satisfying payment. if that all can be hashed out beforehand, this could be a viable method for responsible individuals.

  72. Brad2723 says:

    Doesn’t anyone ever watch Judge Judy? Loans made to deadbeet relatives are just not worth it. It usually ends up with the borrower somehow being able to magically turn that loan into a gift.

  73. @mac-phisto: Agree; there’s a difference between “i can haz beer cash plz?” and a specific loan agreement between two mature and responsible individuals.

    Some relatives, and in some situations, you should expect if you “lend” the money it will probably not come back to you. But in other situations, low-interest or no-interest family loans can be an enormous lifesaver. One of my cousins couldn’t qualify for financial aid for college, so he borrowed money, on very low-interest terms, from my great uncle. My cousin was an extremely responsible young man (who was raised by a widowed single mother, who was widowed VERY young, and in the early 60s, and she had only a high school education — money was a major issue), and my great uncle (who had no children of his own) could afford to lend the money.

    I’ve short-term borrowed from parents when a bill arrived before the money intended to pay it (like ALL THE TIME in grad school, tuition bills beat financial aid checks by at least 60 days, it was horrific). And I’ve certainly also lent to siblings, though much smaller potatoes.

    It’s really an issue of knowing how responsible the person in question is, and whether you can afford it if they “default.” AND what the money is for — is this a bridge to help them when a large bill beats a check and they expect to pay next month? An investment in something (college education, computer for an ebay entrepeneur) that will improve their overall financial position such that repayment is possible?

    If I lent money to my sister to make rent, and she “defaulted” (which I can’t imagine her doing short of utter catastrophe), I would just consider that part of being a family and helping family members who need help. (Also, I suspect if something like that happened and my parents found out, they’d probably make at least partial repayment to me so THEY’D be out the cash, not me.) Now, if it happened more than once, it’d be time to close the bank.

    …And I think Dazette is right, and that those of us okay with borrow/lending intrafamilially seem to be financially responsible with financially responsible relatives, and those who think it ruins relationships seem to have dealt with family/friends who weren’t!.

  74. gingerCE says:

    Do not loan family/friends money. I know from personal experience, something will go wrong and the relationship will suffer.

    If they are only asking a little, and you have the money to spare, then gift it to them or have them work it off–but if they need a loan chances are they are going to have a hard time paying it back on schedule.

    Family should help family — but I just think you have to be willing to eat the money and give it because loans do go bad between family members.

  75. SayAhh says:

    Don’t Be Ashamed To Ask Friends Or Family For A Loan. Just make sure you:
    A) draft a contract,
    B) notarize it,
    C) pay everything on-time and with a check (not cash or untraceable money order), and
    D) don’t end up on The People’s Court like an idiot with no proof, have Judge Milian yell at you, and lose your case

  76. SayAhh says:

    Oh, and your boyfriend/girlfriend/fiancé/fiancée is neither “friend” nor “family” when it comes to loans! :-p