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.

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.

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.

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

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.....

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.

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.

@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.

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.

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.

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!

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.

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.

@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?

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

@forgottenpassword:

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

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.

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.

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.

@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.

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?

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.

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

@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.

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.

@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.

@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.

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?

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

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.

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.

@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.

@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.

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.

@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).

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

@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.

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.

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.

@Ben Popken: Schism! ;)

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.

@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.

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.

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

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

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]."

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.

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."

Worst... Consumerist... advice... ever.