AIBU to object to my husband taking a large loan for a friend?

The fact that the friend as maxed out his ability to borrow is a red flag. That means professional lenders do not think he is a good risk. What makes your husband think he is a good risk and he knows better than professionals with experience in the field?

I suspect the friend's business may be in a death spiral. There is a a point of no return and even a large amount loaned to the friend may not be enough to save the business. We are also talking of a fairly long time frame here from the sound of it. People desperate to save their business may not be entirely rational or even concerned that they can drag somebody else down with them.

I mean has your husband gone through the books or paid somebody to do that to see what the true situation is.

No, I wouldn't think having an ownership interest in the property or venture. That would likely make you liable for even more possible shortfalls.

If he is an utter fool and cannot be dissuaded, at least get this properly drawn up by a lawyer.

As you obviously are aware, there is a lot of conditionality here: if it gets completed to budget, if it gets sold any time soon in the current property climate and if there is a profit.

IMO, your DH is on an ego trip to look like the big man and is totally disregarding the financial security of his own family to do so.

I work in finance.

Your husband is beyond ridiculous.

Firstly, if a mainstream bank won't lend, his friend is high risk. (Banks want to lend it's how they make money!).

Secondly, if an alternative lender, who take higher risks and charge more and often defer interest won't lend, then the project 8s clearly unviable.

Your husband shouldn't do this.
If he does thrn an unsecured personal loan is the most ridicilous way to even go about it.

Being blunt, if your husband is the only way of funding this, it's a loss maker and he'll neber get his money back.

But if there is a contract and the friend ends up bankrupt then the DH will get nothing (or almost nothing) back. If he takes part ownership of the project then he will be chased for the debts of the build. So either way he loses.

Literally the only way he will see his money back is if the friend finishes the build, sells at a profit AND pays all of his debts off. Which, lets face it, is vanishingly unlikely given that the house market is on its arse and he clearly owes the bank £££££, so the DH will come last if he pays anyone at all!

This needs a legal contract drawn up. Your DH might want to reserve a part of the project as his stake in case things go belly up. But I would advise against it. A bridging loan or angel investor might be interested. His friend should try a broker to help him. Also, it's not likely he'll lose money, he just won't make as much, sometimes it's best to cut your losses versus throw good money after bad.
Finally as his wife, pls check if you ar risk of being jointly and severely responsible for the loan if anything happened.

@Sefal I cant help wondering why, given that you have no savings and have loans and debts, you have committed to a high expense commitment for the next few years.

How come you are in this situation when, in your words, you both earn very well?

DH may have best intentions & a verbal agreement with his friend but he needs professional documentation to protect the money & friendship.

Me and my husband both earn very well, but we do not have any savings and have loans and debts ourselves. We have also committed to some very high expenses ourselves for the next few years,

This is batshit insane and will end badly for you. No savings, you're already in debt, and he's going to take out a 5 figure loan for his bestie on a build gone bad? Bestie's under capitalized and has no end date in sight? WTF?

Sorry, I would divorce over this. Your husband's friend is in way over his head and drowning and he's going to drag your husband down with him and you too if you're not careful.

I'd be very clear this is a marriage ender and getting a lawyer consult with divorce papers asap. While you're at it, find a financial adviser who's got fiduciary duty and get your financial house in order. I have a low tolerance for financial risk but this is nuts.

The debts that were taken on for the family will be taken into account. OP will state that the loan was taken out for a friend and a forensic accountant will be able to confirm this so....his problem not hers.

If the house needs to be sold then again, same thing because I am certain that the OP will divorce him in those circumstances, and the loan will be disregarded in his share of equity. He wont get more because of the loan.

The world economy is in enormous crisis.

The loan would be fraudulent if not declared for exact use reasons. The bare minimum would be legal agreements to repay but how you could enforce that on a fraudulently obtained loan??

Ok so when mate doesn't pay it back & the house has to be sold, what then?

Or they get divorced, the debts will be taken into account for both just as the assets will.

The offer of taking out this loan is bad enough. I'd be more inclined to be furious he is prioritising this mans needs over my feelings about it. I wouldn't stand for it & your DH is being ridiculous.

I feel really sorry that you’ve been placed in this situation. It’s so obviously an absolute recipe for disaster. If your husband goes ahead with this, totally disregarding your feelings, I would be seriously considering divorce.

I hope he sees sense - as you are both high earners with no savings but high expenditure, it’s maybe time for a long think. Did he get you into this predicament? Would you be better off alone, living with peace of mind and within your means?

Again, no.

In a divorce if she can prove that the loan wasnt for the family (and it sounds like she can, an accountant will be able to show where the money went) it will be his debt to pay and not "theirs". Creditors cannot legally pursue her for the debt as long as it is in his name only, which it will be as the OP refuses to support it.

Eh? No she wouldn’t.

No she wouldnt. Why do people still believe this?!

Whether you mess around with separate bank accounts, in the final analysis if you're married, you're one unit. His debts are your debts. You should absolutely have the right to veto him on this.

Really hoping you meant shouldn't.

You are married so of course.

Bye bye money, bye bye friendship, bye bye marriage. Sorry to be simplistically bleak, but that's probably what's going to happen.

But it sounds like the "friend" is on the verge of bankruptcy so that agreement wont mean anything if he does end up insolvent. All his debts would be at worst written off and at best, paid 10p in the pound. It would be complete madness to do this.

Your husbands decision is ludicrous, absolutely insane. The fact your DH has to loan it means he doesn’t have it to lend. I absolutely guarantee he is never getting that money back, they never do in these situations.

As for getting a formal agreement drawn up - it’s not worth the paper it’s written on if he just simply can’t pay your DH back. Your DH can go to court by all means, and get a lovely piece of paper with a number on it, that he’s totally incapable of enforcing because there’s nothing to enforce it against.

They do say if a bank won't trust someone, no one else should either coz theres a big red flag blowing right in front of your DH and he's choosing to ignore it.
If you've got a mortgage together and he struggles to pay this loan then it affects you too coz you're basically connected to him financially.

Maybe he needs to see a solicitor and get a proper contract drawn up so that if he tries to not pay it then your DH can take him to court . Keep ALL msgs and especially ones saying it's a LOAN and friend is going to pay him back.. You need written proof at the very least. Not just word of mouth..
But it would be better if your DH said no of course.

I’ve done this @Sefal and the person basically paid me the loan amount monthly just before the bank took the payments each month. I didn’t want to do it but felt I should - never again though. Spent every month worrying they’d not pay.

If he insists on going ahead, make sure it’s a fixed rate, unsecured loan, that only he is on the loan contract and not you, get him to get something in writing that states the friend will pay x amount for y months on z date each month, so he can take him to court if he doesn’t pay. And only do it if he has the loan payment spare every month.