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I only ONCE loaned money to a friend. He never did pay me back and that ended the relationship and I was parted from my money. I learned my lesson well.
I haven't lent any money to anyone, and I won't give any to anyone.
I have a current friend out of house and home now due to the housing crisis and a rejection of request for a loan modification. I have already informed him NOT to come to us as we "don't have it to lend". AS he is not family, it is easy.
I never lent to family either, sorry. I once borrowed money from my father, and made a big deal of paying him back in 4 months, so he would remember that I did. Meanwhile, I found out, he was giving my brother money hand over fist without ever seeing a penny back.
"Never a lender or a borrower be" is a famous quote that one should live by.
If not and you DO lend someone money, think of it as a gift; as Money Maven Suze Orman says, because "you may never see it back". And do so ONLY if you can afford to lose that money.
Just say, "No, sorry, can't help." You don't need to explain anything or make up excuses.
If you actually do decide to loan someone money, it's healthier for them to learn to be responsible and pay it back as promised on your written agreement, but don't stress about it and don't loan unless you're comfortable never seeing that money.
Please don't feel guilty that you actually have been smart enough to have saved a little money.
Years and years ago, when DH was first starting out in his career out of college, he was making an excellent living and we were doing extremely well. Someone DH knew approached him about investing in his business. I was leery, but I deferred to DH, since he knew this guy better, was very business savvy, and understood this industry better than I did. So DH "loaned" him $10,000. Had a contract drawn up, signed, repayment schedule, etc. Long story short, this guy's business tanked, he did not have the money, and could not repay. We considered suing. Then his oldest child died of some genetic disease. We put it off. Considered it again. Then his youngest child died in a car accident. We decided to let it go. We did not need the money at that point, and this guy had more than he could handle.
"I'll need collateral worth twice what you want to borrow, proof of income for the last two tax years, employment verification, a credit report, and loan origination fees to cover the cost of hiring an attorney to draft the contract."
Simply state: "I've been burned too many times in the past by lending money to close friends. Even when paid back it still makes things complicated, so I've decided to avoid doing it in the future."
Offer to point them to a credit union or something else if you want as a way to help. If they respond by saying that those people won't lend them the money... well that's just further proof that you shouldn't either.
If you give money to a friend, just accept that you will never see it again. Last year I had a friend who was going through chemo for leukemia and was in the initial stages of foreclosure on her house. I paid thousands of dollars in back mortgage payments for her, and she didn't even ask. I just couldn't stand the thought of seeing her getting out of the hospital only to be homeless, and I had the money. The doctors finally cut her off of the chemo and sent her home to die, but then she went into spontaneous remission. Not having to worry about losing her home may have given her the edge she needed to live. I may have saved her life.
We're still friends. We talk on the phone, and I have been to visit a couple of times since. I will never ask for the money back. I do what I can for less fortunate friends and relatives. If I can't, I don't. It's that simple. FYI, my wife is down with this and feels the same way.
We are not what I would call wealthy, but we are comfortably retired. We're nowhere near the 1%, but probably near the bottom end of the 10%. We still have to budget, but there is quite a bit of room in the budget. Last year I spent several thousand dollars on home repair out of cash flow. If you have enough, don't get greedy. If you don't have enough, don't try to play banker.
If you can't afford to give as a gift, you probably don't want to lend to anyone, even family members.
Have paid back taxes for a family member's house...which ultimately got foreclosed anyways. C'est la vie, I have no expectations of ever getting that money back, in that it was a gift.
Never loan money - you're not a bank. Either give the money as a gift, without any expectations of repayment, or don't give it at all.
This. You're no bank, so why are you expecting repayment? And if you want to be a bank...
Quote:
Originally Posted by ncole1
"I'll need collateral worth twice what you want to borrow, proof of income for the last two tax years, employment verification, a credit report, and loan origination fees to cover the cost of hiring an attorney to draft the contract."
...this is what you should do.
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