What's Your Policy On Loaning To Family?

[Bini]

We're not currently in this situation but we have been in the past. This was a few months ago when my husband's brother's truck broke down. He told us it was too expensive to repair and wanted to borrow one of our vehicles, not for a few days or even a week but for several months.. Long story short, this particular brother has a nasty habit of being a moocher and consistently takes advantage of those that reach out to "help" him. So after a lot of consideration and discussion over it, hubby and I decided that the best and smartest option was to say, "no".

What's your policy on loaning to family? Does it depend on how large or small the loan is? Does it depend on who the family member is? If you do loan, is it a freebie? Or do you expect it to be returned or paid back in full? What do you do when the loan is not returned or paid back in full? Does it burn the bridge between you and that family member?

[PrinceofLight2000]

What's your policy on loaning to family? Does it depend on how large or small the loan is? Does it depend on who the family member is? If you do loan, is it a freebie? Or do you expect it to be returned or paid back in full? What do you do when the loan is not returned or paid back in full? Does it burn the bridge between you and that family member?

I'll answer these in the order in which they're asked. :)

1. Paid back, without interest.

2. No.

3. Depends on how trustworthy they are.

4. Wouldn't that make it a gift and not a loan?

5. Yes, though I'm willing to adjust depending on the situation.

6. It shouldn't if you clearly tell them that it's a loan and not a gift.

[Guest mirancs8]

Loan to family = don't expect it returned

[Guest Alana]

I only loan as much as I can afford to not have back. That way there's no hard feelings when it doesn't get paid back and it also means I usually say no.

When I do say yes, I do it differently depending on the person. One person, I hash out a specific payment plan. With my parents I just usually say 'here's your early Christmas gift' because I know it'll never get paid back and then they'll stop talking to me because they feel guilty. With bro in law I find jobs around the house for him, that way he can earn money and doesn't feel like he's borrowing. Usually though if someone asks how we're doing financially I say things are tight, to buy me some time to ferret out what's going on.

[Guest mormonmusic]

What's your policy on loaning to family?

On my family's side, my Dad asks me now and then, and I do it, but only if my wife agrees. On my wife's side of the family I don't do it given the character of the people.

Whatever you do, don't do it without your hubby's full consent, which it sounds like you are already doing.

Does it depend on how large or small the loan is?

That's a major consideration. If they want so much money that I'm going to be without a financial reserve, or its just too big, the answer is "No".

Does it depend on who the family member is?

Definitely, my Dad ia a business man and he always keeps his commitments. So I am willing to lend to him. But to my wife's side of the family, they already owe everyone in town and haven't paid them back, so no way. At one point, my wife's parents had lent money and none of it was given back to them yet, and the borrowers then came to us because the parents refused. Bad situation.

If you do loan, is it a freebie? Or do you expect it to be returned or paid back in full?

It's never a freebee. Even lending liquid money in our account has a cost, so I charge my Dad the amount of interest I could be earning/saving if the money was invested/used to buy mutual funds/pay down debt. Also, charging interest, preferably a higher rate of interes than most other alternativest, encourages the borrower to pay it back. If it's an interest free loan they will pay down other more expensive debt before paying our loan back.

What do you do when the loan is not returned or paid back in full? Does it burn the bridge between you and that family member?

I never let the amount go so high I'll be cursing the family member forever. So, the rule "don't lend so much you can't sleep at night" applies.

I've always had it paid back with interest because I've been really careful who I lend it to. I think it would hurt the relationship if they didn't pay it back, when they agreed to pay it back when it was lent. But I would probably learn to forgive since they were family. But I wouldn't like it.

If they don't pay it back, then I ask for work. They need to do some kind of equivlanent-value work that will help us in some way, like regular babysitting, help with labor around the house etcetera, or using whatever skills they have to pay off the debt. My brother in law is a mechanic, so if he wanted to work off the debt by fixing our cars for free, so be it.

I know this might seem kind of heartless, but on my wife's side, they can be freeloaders. With them, I prefer to give some kind of "debt counselling" to the extent they are willing to share information. You'd be surprised the alternatives you can shake up for them when they explain their situation. Just the fact that you help them explore other alternatives sends a message that you don't really want to just write a check. My brother in law, after I put him through a few questions about savings, financial reserves he might have on hand, etcetera, called back and said I didn't have to lend anything.

With my wife's family they were always asking me for money when they learned my wife and I were both working. I eventually just got hard nosed and they managed to survive through other means.

Now, I would consider giving money to family if I felt they had done everything in their power and life had given them a lemon. Like the husband died, all savings had been depleted, and the mother of my neices and nephews was going to be evicted. In that case, I'd probably step up with an interest free loan or outright gift.

I've never had to, though.

Edited October 16, 2010 by mormonmusic

[Bini]

Thanks for sharing guys.

Not expecting a return or it being paid back in full is a nice sentiment. However, depending on the situation and what is being loaned plays a big factor in whether or not it should be returned/paid back. Like us lending one of our vehicles to the BIL. It's not a gift, we definitely want that vehicle back! Unfortunately, there are people out there that assume a loan is a gift.

[slamjet]

Write and Sign a Contract. And if they are offended, then you can imagine what would happen if they damaged the truck.

[Just_A_Guy]

I agree with Slamjet. If you're going to make a sizeable loan, write up a contract the same as you would if you were lending to a stranger.

If you're not willing to take the family member to court if he/she defaults, but you still want them to have the money, it'll be better for everyone if you just make it a gift outright. That way, the needy family member isn't a liar and you're not a sucker.

[Guest mormonmusic]

I have a contract when I lend money to my father. It includes provisions like I can ask it back if I need to, and what happens when the term is up and he wants to renew for another period -- if that's even possible.

[mightynancy]

I never loan more than I can afford to give. And then I forget about it. It's not worth it to me to have that discomfort between us.

[jayanna]

I never loan more than I can afford to give. And then I forget about it. It's not worth it to me to have that discomfort between us.

Luckily, I haven't had family borrow more than I'm willing to give up, and not see again. I actually forget giving them anything and move on.

However, repeatedly giving them money might not be a good idea. Emergencies are one thing, but to be a safety net that allows them to continue with bad spending habits would not benefit anybody.

Borrowing a vehicle, they would have to get insurance, and make the payments! Also, if there were no payments, we would get it back on the weekends.

[Blackmarch]

Loan to family = don't expect it returned

loan = don't expect to get it back....

period.