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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

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Original poster

AIBU to think friends don't charge interest?

116 replies

ibid · 03/04/2012 23:05

[name change]

Like a lot of people, we're financially screwed at the moment, (partly because DH lost his job when the company he joined lost their contract and he had only been with them a month and he was laid off - he's temping now, but it's a fraction of his former salary), I was on maternity leave and am back at work now. But we're struggling. We've cut down and back and around, and back down again, but we're still in trouble.

In desperation, and about to miss a mortgage payment and unable to ask family for money (for a lot of reasons which I won't bore you with), we asked a friend to lend us a £1000. It's a lot of money I know. He very. very kindly agreed, with the proviso that we cover the loss he would make taking it from his ISA of 4%. He has calculated this at £75 over the 4 weeks, plus 'fees'.

I'm really grateful for the money but I can't imagine charging a friend for a loan. And whilst it's very much 'his money'; his rules', I do feel let down. Is that an unreasonable feeling? Would you charge a friend when you knew they were struggling?

OP posts:

DamnBamboo · 03/04/2012 23:08

I don't think YABU, but then I also don't think he is being unreasonable eithr be honest.
Could you not contact the bank and explain he situation re your mortgage?
They will often just ask for the interest only.

If it's in an ISA, there are restrictions on taking money out of this sometimes.

Are you saying he should incur the £75 cost to lend you money?

AnHonestHCA · 03/04/2012 23:08

it doesn't sound like he's charging interest in the form of making a profit like it sounded from your title, it sounds like he's just asking for you to re-emburse him for LOSS of interest and also fees (there can be charges/penalties for taking money out of a savings account before an agreed time, if it's a 4% ISA then it probably is one that penalises heavily)

and it sounds like the extra was agreed from the start and not added on after, in which case you have agreed to the terms, and should, IMO, be grateful that your friend trusted you with a loan

LoveHandles88 · 03/04/2012 23:10

I would also feel disappointed at this. But, if he was the only one willing to lend you the money, I guess it's a 'suck it up' situation, and you'll know next time what to expect. And if he was upfront with you from the start, I guess you can't complain.

PuggyMum · 03/04/2012 23:11

Where's he got an accessible ISA paying 4%? and £1000 interest at that rate would be £40 interest per year? And what fees? I an ISA provider charges you to withdraw the cash theyd be slammed by the regulator!
Ok if his ISA was a fixed rate and withdrawing would mean he'd lose interest on it all but my thinking here is YANBU and this friend is as bad as the nasty banks!!

DamnBamboo · 03/04/2012 23:14

Could be a long term fixed ISA and could be interest lost from withdrawing it in the first place. You may also get a lower rate of interest on the balance if you make a withdrawal.
You can't put money back into an ISA if you've already reached your max for that year and maybe he has?

There are some many different ones with so many different T&C's, it's really not that far fetched.

LotusPalm · 03/04/2012 23:19

Interest at 4% of £1000 is nowhere near £75. Is he loosing all the interest over the whole term of the ISA because he's taking the money out? And what are the additional costs? If you only needtoborrow the money over the short term I would think there are cheaper ways to do it tbh.

Talking to your bank / mortgage company would be a good start.

It is his money though, and he's good to lend to you. And you did agree the terms.

AutumnSummers · 03/04/2012 23:19

I've never heard of anyone doing this before but I can see why he would want to. At least he's being upfront about it and not trying to stick you with it after the fact.

The "plus fees" thing seems rather vague to me though and I'd want clarification before agreeing to it.

Probably best to put of this in writing if he's going to be like this.

AnHonestHCA · 03/04/2012 23:20

if it was a fixed term one then he would lose more than just this year's interest though wouldn't he? or sometimes there is bonus interest (if I always gave enough notice with one of my accounts - 90 days, I got bonus interest), or things like that that makes it seem on paper less like a straight forward charge (but it is really)

DamnBamboo · 03/04/2012 23:20

To be honest, he stand to lose more on this than you do.

Is he asking for a contract from you?

Or is he just handing you over the cash?

AnHonestHCA · 03/04/2012 23:23

basically, he is only asking to be returned to the position he was before he lent you the money once you repay which is not UR. He would be UR to ask to be in a BETTER position after repayment than before - that would be amateur loan sharking wouldn't it?

CaramelisedOnion · 03/04/2012 23:23

YABU I think - he is going to lose money as a result of lending it to you so he is asking you to cover that loss. If he doesn´t - it is like him lending you 1075 and only asking for 1000 back.

DamnBamboo · 03/04/2012 23:26

To flip this on it's head, he might be saying, 'AIBU to think that friends don't ask to borrow money that will cost me in the long run'

GirlWithTheMouseyHair · 03/04/2012 23:29

Can see why you're upset but then I don't think he's being unreasonable to ask not to be left worse off than if he'd not lent you the money.

We borrowed 2k off my brother towards our flat deposit and right from the start said when we come to remortgage or sell we would also pay the interest he would have earnt if he'd put it in a savings account. We drew up a contract etc so all above board and no room for fallouts

Original poster

ibid · 03/04/2012 23:31

I think the 'fees' and the interest calculation are spurious at best. As I said, it's his money, he agreed to lend it to us and we weren't in a position to argue. Additionally, I'm beyond grateful for it and I'm paying it back this week.

However, I am surprised at the £75 charge. I've been in the position previously of being able to lend money to a friend who was in trouble and it wouldn't have occurred to me to ask for anything over the amount. Different strokes I suppose, and he's not my friend but DH's.

OP posts:

DamnBamboo · 03/04/2012 23:35

You may not have done it, but he is not unreasonably to not want to pay £75 to lend you money.

He may have locked it away in a three-year, five-year fixed ISA and the £75 charge wouldn't be unreasonably for many reasons listed above.

I really hope your situation improves soon OP

ZenNudist · 03/04/2012 23:48

YABU I don't think you should be borrowing this money. Not only do the interest & charges sound about right for a fixed rate ISA but also he will lose the tax free element on this saving for that particular years ISA. You will be costing him more in the long term so £75 is a bargain. I would try and reach an agreement with your mortgage provider instead if it really is a stop gap of 4 weeks. They have to make efforts to prevent default and repossession by reaching an agreement with home owners. As you are already complaining about this friend it doesn't bode well for your friendship if you entangle your finances.

DoubleGlazing · 04/04/2012 00:08

YABU. It's not reasonable to expect him to miss out on money he'd have otherwise had.

AThingInYourLife · 04/04/2012 00:24

He's not charging you interest.

You don't sound that grateful, given that you expect him to pay £75 for the privilege of lending you money.

Jinsei · 04/04/2012 00:33

If I was borrowing from a friend, I would be insisting on compensating them from any loss incurred as a result of their generosity. Not complaining about them behind their backs.

ShadowsCollideWithPeople · 04/04/2012 00:58

YABU. Sorry, but he is doing you a favour. He clearly has his reasons for asking you to pay the extra £75, and really, you are free to decline if it bothers you this much.

I am sympathetic, btw - we were in the exact same position about 2 years ago, I had just been made redundant and we needed to borrow £700 to pay our rent. We first asked one of DP's brothers. Said brother and his wife are quite well off, but they said no, they don't loan money. No problem, their call. DP's friend / colleague (someone he regularly freelances with) did loan us the money. He did not ask for interest / additional payment, but if he had, we would have happily paid it - he was helping us out, big time. That should not have cost him money.

I too, have helped friends out financially when I could, and would have never dreamed of asking them to pay extra. However, I was not taking that money out of savings, so I didn't incur any costs by loaning the money.

As AThing said, you really don't sound too grateful. He is helping you out. Why the need to specify that 'he's not my friend but DH's'? He is clearly a friend to both of you, if he is helping you both out financially. If you think that the ' 'fees' and the interest calculation are spurious at best' then decline to take his money. Don't accept and bitch on the internet about someone who is doing you a favour.

pohara · 04/04/2012 01:31

I sympathise with your hardship, stressful isn't it.

But I think try to be glad that he is helping you out and, however you calculate interest or whatever, it is not such a large sum of money as to be unreasonable. It also makes the contract clear and means you are not left feeling you continue to owe him.

Money and friends don't mix well. I think accept the offer and pray you never have to borrow from friends again.

ShadowsCollideWithPeople · 04/04/2012 01:40

Oh, meant to say - put it writing, make an agreement wrt to payment. Believe me, it will feel more manageable than just borrowing cash and planning to pay it back whenever (which is the agreement DP had with his friend when we had to borrow money). It is nice to feel somewhat in control of the situation by having a formal agreement and payment plan in place. Again, I do sympathise, but if a friend is loaning you money, then I think it is a 'their money, their rules' kind of situation.

ZacharyQuack · 04/04/2012 02:31

He's not charging you interest. He's asking you to cover any costs incurred by him lending you money. Do you expect him to cover any fees or loss of money because he's your DH's friend?

PorridgeBrain · 04/04/2012 05:37

Sorry to hear you are struggling. He is not being unreasonable to reinburse his losses but as others have said that works out at about £3 per month so not sure how £75 has come about. Having said that, as its his money, he an charge what he wants to unfortunately.

Have you agreed how long you would pay it back over? If not, I would as Shadows says put it in writing for both your sakes to be clear you both understand the terms of the loan and to protect you both - eg so he doesn't ask for another £75 next month! We recently bought a car from a friend who agreed to let us pay it over a few months and had it all in writing what would be paid when. I emailed every month to say I had transferred the money and got them to confirm they'd received it but Also made sure I transferred the money electronically so I had proof of payments. It may sound OTT for friends but I think when it comes to money lending You need to treat it like any other loan to protect yourselves and your friendship

On another note, have you spoken to the mortgage company and explained the situation and discussed options of going interest only temporarily or taking a payment holiday. If you have always paid on time, they are normally open to helping in the short term.

Hope you find a solution

GavisconJunkie · 04/04/2012 07:23

YABU I wanted to say you weren't but there are penalties, longer term, especially with fixed ISAs & you can't put it back in. So when you repay him he'll have to put that £1000 in something with a much lower yield.

We borrowed money in an emergency from fil years ago. Our mortgage rate was 3.8% (ah, the good old days!) & he charged us 4%. He has a LOT of money invested & I was a bit shocked, but we had no choice & it did pull us out of a hole. Fast fwd 8 years & his feckless dd decided she needed a semi- detached 3 bed house when she finally left her partner, about £60,000 over what she could've spent on a nice big house in a different area. She has borrowed £140,000 interestfree to be paid back when she can.

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