Quote:
Originally Posted by old_cold
Yes, with the understanding that they'd be changing their habits so this kind of situation wouldn't happen again
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That was exactly the condition we set for one of our relatives when we bailed her out 10 years ago. She was facing losing her home due to unpaid property taxes. She also had 10K in credit card debt. We went through her spending habits and made specific suggestions before providing her with the loan (notarized promissory note with scheduled payments).
Although she had not paid us back a dime, we consider the loan a kind of 'life-changing gift' because she had made some major changes such as stopping the girls-weekend-night-out feeding the slot machines, stopping the cellphone services, removing HBO from the cable menu etc.
We have done both giving and getting loans from relatives and friends. We got a small loan from our PIL to have 20% down payment from our first home, and another from my sister for the second home (while waiting for to sell the 1st one). We paid back the loans within a year (lots of peanut butter sandwiches, home-grown vegetables and thrift-store shopping!).
Our experience with more than half dozen loans to others is that you could pretty much predict the chance of getting paid back based on the circumstances of the loans. All the loans for opening business practices or meeting 20% mortgage down payments have always been paid back well before the due dates. The two loans which did not get paid back were bailing-out-of-debt cases! In both cases (included the one I mentioned before), we knew that there would be a very slim chance of ever getting back a penny but we felt it was necessary to help our relatives.
Bottom line is that we do not subscribe to the sentiment expressed in Shakespeare' Hamlet quote below. Even though we had some 'bad' loans. We consider the loans to be good deeds. They strengthened relationships and gave both loaners and borrowers life encouragement that we could always count on each other.
"Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man."