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

Of course this is how investing works, but in this case the risk appears to far outweigh the potential rewards - otherwise the commercial lenders would be queuing up to lend money to the guy. At the same time, the OP's husband is not investing a bit of spare cash - he's proposing taking out a five-figure loan when the family is already financially stretched. Repayments on a £40k loan are going to be in the region of £800 a month, if not more, and the total cost of borrowing the £40k over 2 years is going to be another £8k - £10k. (The hypothetical £40k is just continuing the previous illustration - the sum might be less, or it might be considerably more).

Even upping his % is of no use if the project itself is not viable and the "friend" can or will accept whatever terms the DH dictates if he is desperate. Either the friend is facing the contractors walking off site if their invoices have not been paid, or he is betting that he can complete and sell and save his own skin. Either way, he's pushing a big chunk of the financial risk on to the OP's husband. If the project, completed or otherwise, sells at a loss or at very little profit, the OP's husband can kiss his £40k-£50k goodbye. Being owed "£40k at 10% interest" is worthless if the prouject has collapsed or the friend has been bankrupted.

Nope. Personal unsecured loan in DH’s sole name. Nothing to do with OP. And since the loan money hasn’t been spent on anything to do with the family, in any divorce proceedings a court would be likely to rule that he pay the loan out of his own share of the assets.

I would be completely against this and if he insists on going ahead with it I would make sure that I'm protected from any losses.

This is what I keep coming back to. And if DH is getting a personal unsecured loan what’s he going to tell the loan company when they ask what it’s for ? He’ll have to lie because they’re not going to lend him £50k to give to someone who high street lenders consider too high risk for credit. So not only a loan which has been obtained fraudulently, but with absolutely nothing tangible to say any money has ever changed hands. Bonkers.

Also you may both have high paying jobs now but what is the jobs market like for you both? Is there any whiff of redundancies as often the high earners are out first! DH is a medium earner and a little worried about his job over the next few years so we have just cleared the mortgage and are funnelling as much money as possible into our savings!
The financial security of your own family should come way ahead of any extreme loans to friends and it sounds as though your financial security is nowhere near strong enough even without the loan, your focus needs to be on shoring up your own finances!!

Hmm, I wonder. It's not as easy as all to get such a large loan that however good your credit is. I'm guessing he would have to lie about why he wanted it.

DH has a friend exactly like this and in spite of friend's perception that it's always been 6 of one and half a dozen of the other, since I've known DH it's all been one way. However, it's only ever been a few hundred quid from time to time, and we know we will never get it back.

£50k I would be absolutely furious and do everything in my power to stop it.

His friend is a financial liability.

For someone who earns a high salary, your DH really isn’t canny.

“No sorry, my wife will divorce me.”

Who on earth cares if his friend knows it’s your decision.

Sorry to raise this, but as your DH is making such an irrational decision here in the face of your family finances, and is doubling down, is there a chance his friend is holding something over him to put pressure on? A past indiscretion or knowledge of something he doesn’t want you to know about

Some posters have suggested investing in the project rather than a loan. I’d be wary of doing that without carefully reviewing the way the project has been structured and every agreement with 3rd parties relating to it, as under some circumstances being a partner in the business could land someone in even more hot water if the whole thing goes tits-up further down the line and creditors start circling.

Your husband is throwing good money away after bad. His friend does not sound like a particularly good business person. I think if there is still 12-18months of work outstanding it is unlikely the amount that your husband will be able to borrow will remotely be able to cover it. If this was a sound investment his friend would be able to source the money via proper investors etc. This project is never going to finish. Your dh might as well just set fire to the money.

This would be a massive massive issue for me if I was married to him. I would actually consider ending my marriage over this.

Sorry but if the friend has already maxxed out all borrowing, I would not feel hopeful your DH will even definitely get his money back - plus everyone else will have to be paid off first.
He is going to have to tell his friend after further discussions it doesn't look like the bank will give him the money after all.. please don't let him do this!

You would assume incorrectly unless the loan is in joint names. The OP would have no requirement to repay a loan she's not signed up to. However, unless she can prove that she didn't benefit from the loan, and they divorced, it's value could be taken into account when drawing up a financial settlement.

In any case, he/they would be absolutely nuts to give the friend any money.

If banks, who make their profit from lending money to people, have cut off this friend’s supply of credit, your DH should take note.

This. Is DH going to lie on his loan application?

Yanbu. I would be getting divorced.

This can’t be real?!

Basically your dh taking a personal loan to gift 50k to his mate.
That is nuts.
A promise on a possibly bad venture (since no one else will loan) means nothing.
Divorce and tell him to marry his mate .
Even if he gets a stake eg 10% it could be a loss when sold

If the friend can’t get a loan in his own right I would be extremely worried about his ability to repay your husband. Your husband does realise that he will have to make all payments for the loan if the friend can’t/ won’t? If he is already worried about money and you have your own debts and no savings then this sounds one of the craziest ideas I’ve ever heard! If you were both rolling in it and well set up with savings and no debts then that’s a different story but surely this loan could end up bankrupting you both!!

I’d get some proper financial advise about your liability for the loan. I’d assume if you are married it would be classed as a joint debt?

There’s no guarantee the friend will finish the project, even with a loan, and it may be hard to sell if it is completed.

The friend sounds likely to go bankrupt, but this personal loan would not be part of that if in your husbands name.

Presumably your husband would take years to pay it himself, and may not be able to afford other things, eg your mortgage payments.

Your husband won’t be doing his friend any good by screwing up financially along with him.

I have not always been a paragon of financial virtue but this is lunacy and the friend is one CF to ask.

Are you in a position where you could leave your marriage if your DH insists on going ahead? Because honestly that would be where my head was at if I was in this situation.

He is an idiot. And, as his wife, you are on thr hook financially too

This. Please speak to a financial advisor about your own finances.

This sounds more like a fantasy thing, finance, sell, lots of profit, repaid, quids in.
I doubt h would see much, if any his of money back.

I would be contacting land registry to notify them and explain that a charge might be put against the house but you haven't authorised it. You can ask to be notified if any requests are made against your address. I did this and it is/was free to do.
If it was my h and he went ahead with this hare brained idea I would seriously be considering out future.
You say they've been friends for 40 odd years so guessing your h is at least 45.
Might be on good salary now but what if that changed?
Is this out of character for him to make such a flambouyant gesture?
A loan of a few grand is a lot less than what you are saying. Have you seen the actual building work? Is it in this country or abroad?
If his mate can't afford it he might well have to go bankrupt, it's not your h's place to sort out. Well he can obviously but not if it's dragging you into the fray.

If this goes ahead insist a charge (second charge) needs to be put against this guy's private residence for the amount BEFORE the money is handed over.

It's no good having paperwork or promises of repayment if the guys business goes bust he will say he can't pay and probably has limited liability - or without paperwork can deny the money was a loan at all and say it was a gift.

If you aren't familiar a charge is what a bank has registered against your home if you have a mortgage. When the house is sold the solicitor is obliged to repay the charge. If the chap has a mortgage hey would have the "first charge" and you would have to be the "second charge" so if the house was sold the bank is first in line for repayment of the charge and then you for repayment of the loan (second charge) - before the chap gets his sale money. If the money is repaid the charge can be removed.

If your husband's friend won't register a charge against his private residence (assuming he has one) putting his own home and equity at risk then there is no way you should put your money at risk if he is not willing to put his money at risk.

So your husband could say he will lend if a solicitor puts a charge against his private residence (only after this is done lend the money). This doesn't solve the problem that repayments might not be affordable for you or that forcing a sale of the chaps house will be a lengthy, costly process and destroy their friendship but it does secure your money to some extent assuming there is equity.

I think telling the chap your husband has applied for the loan and failed on affordability because he already has too much debt (as suggested by others) is a really good idea.