AIBU to think friends don't charge interest?

[ibid]

[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?

I don't think it's unreasonable of him to cover the loss of interest. As others have said your OP is misleading. Also he was upfront about this when he loaned you the money and you agreed to it so YABU.

I think it is fair-you were asking him to lose money-effectively burn it.
You might have a case if he sprang it on you afterwards, but he told you the conditions FIRST and you accepted them. YABU.

I do not have any friends that I would assume or expect would be willing to give me a gift of £75. Clearly you do. Why else would you expect him to suck up such a loss purely for the privilege of paying you £75 to borrow his money.

I don't understand how ISAs work, but if as someone else said upthread, he cannot return the money to the same investment once you have repaid it, it is likely that he will be earning a lower rate of interest on the money in the new ISA he presumably has to have. In that case, he is not just losing interest on the money for 4 weeks, or even one year. He is losing it on the entire time the original ISA had still to run.

You needed the money. He was generous enough to help out. It is VVVU of you to expect him to take a loss on it.

We borrowed money from my parents a few years ago to enable us to renovate the house we had bought close to them. We needed the money to be able to start work on our new place while the sale of our old home was going through.

We drew up a loan agreement and agreeded to pay them the same rate of interest they would have had if the money had been invested.

It was a business deal, and fair on everyone - it would have been nice if my parents hadn't wanted interest but we were happy to pay it as not having to wait for the sale to complete.

OP I think you are being very unreasonable regarding your friend. They have done you a massive favour by lending you the money - they should not be out of pocket by doing you a favour!

Before you agree to anything, speak to the mortgage provider - they may well offer you either a 'payment holiday' or go interest only (assuming you're on a repayment mortgage and that isn't already interest only). If you can't afford £1k this month, will you be able to pay back the £1,075 to him and find the £1k next month for the mortgage?

Don't just keep getting into more and more debt, talk to your creditors.

Oh, and as others have said, he's not charging you for the money, he's expecting you to cover his losses, and to be honest, if you are struggling with the mortgage, he's taking a huge risk that you'll default on this loan.

I haven't read any of the posts but I think that whilst friends don't charge interest, friends pay interest - and would insist on doing so, or making some other demonstration of gratitude.

Op what did you want him to do? Lend you £1000 and suck up the costs involved so you can have the £1000? In lending you the money he is out of pocket, he is only asking to break even on the loan.

You don't seem to be grateful at all, he's risking £1000 and your moaning about paying a little bit extra to cover him.

YABU to think that he should sacrifice his interest (and suck up any penalty fees for withdrawing the money) in order to help you out.

Do you think he should lose out?

One of the really good things about mumsnet is seeing other people's opinions. When I see it written down, it's clear - you're right, I'm not grateful at all. I may be thankful, but no, I'm not grateful. The loan was last month and I'm paying it back this month - so in that respect it's all done and dusted...

Having thought about it as a result of this thread, I've realised a few things. Firstly, I don't believe, at all, that it has cost him £75. He's decided what he thinks is an appropriate amount and decided to charge that, which is his right, but it is entirely contrary to how I would behave, so it seems grasping to me.

Secondly, I am unbelievably pissed off that I am in this position and that is colouring my viewpoint. 18 months ago, £75 was lunch on a Saturday, and now it represents two weeks of shopping and I hate it.

A few years ago, I lent £2k to a friend who was really struggling to find the school fees and it didn't occur to me to either work out what interest would have been lost or specify a time frame for repayment, because she was a really good (childhood) friend of mine and I knew she would give it back to me when she could because I trusted her, and of course she did. I'd happily be out of pocket to the tune of £75, if I could afford it for a friend. It's just a different mindset I suppose.

So, I do take on board what been said. It is unreasonable to 'expect' someone to not take fees/charges/interest or whatever that is , into account. But that's not the way I work and if we ever get out of this financial black hole that we're in and back on an even keel, and if one of MY friends ever wants money, and I'm in a position to lend it to them, then I'll still do it my way.

I can see both sides, but ultimately YABU.

It sounds like you wouldn't have offered to cover his losses for lending you the money, although I realise you haven't said either way so you might have done. If you didn't offer to cover his costs, you would very definatly be in the wrong.

You can't expect other people to do things the way you would do them, even if your way seems more friendly, you are no more right than he is. He might have to think about the loss to his family (if he has one) and he would be doing them a disservice if he agreed to lend this money without covering the costs. Dh and I aren't in a position to lend people money, but I would like to think we would do it if we could. However if a friend of DHs wanted to borrow money that would effectively cost us, I would think he was putting his friend before me and our children, and that would be very wrong.

You think he seems grasping?

The man you hit up for a grand?

Um, OK...

£75 interest on £1000 for 4 weeks is 97.5% p.a. That's no friend, there's another name entirely for people who do that.

Sorry, I haven't read the whole thread, but was so outraged on your behalf I had to do the sums. Talk to your bank. They will often switch the loan to int only for a period of time if you;re in financial difficulties.

I have no experience of payday load and wouldn't recommend it, but would choose that over an informa1 arrangement with a friend. Shouldn't be necessary though, speak to your mortgage lender ASAP.

I think you should still look at contacting your mortgage provider and see about a payment holiday, if things are that tight in the short term because of you building up reserves again from mat leave, it might be worth giving yourself the breathing room.

Totally with A Thing on this one except that I can well see how you're pissed off with the way things are panning out for you at the moment. They WILL get better though.

FWIW I don't think £75 is pushing it or remotely grasping as you seem to think. My son asked me for a fairly hefty short term loan a few months agao and together we looked into what it was going to cost me as I would have had to liquidise part of a longish term investment and I was totally breathtaken at just how much it was going to be (my son bless him was even more so, and thought again!).

If there was a time (or comes another time) when you could afford to lend a friend these sorts of sums out of current income then good on you, and I don't doubt for a minute that you would do just that, but honestly you seem to have a really good friend there who is behaving absolutely like one, so I really would not let your understandable money misery spill over and spoil it.

The point is Freeforall that if it's an ISA he won't be able to pay it back in, and there are almost certainly early penalties for early withdrawal. As I said, I don't think £75 sounds out of the way at all, in my experience.

Actually ibid my sympathies are entirely with you. I can't believe that lending you a grand for a month cost him 75 pounds. Not a chance. Did he just name that figure when you asked him? Because if it were truly justified, I would expect that the conversation would be something like this: "yes I'd be happy to help you out, the only problem is my money is tied up in various saving schemes and there might be a cost attached to taking some out. Could I look into it with the bank and maybe ask you to cover those costs if necessary? I'll tell you exactly what it comes to". Followed by a phonecall next day with a more realistic amount. I mean 75 on 1000 is HUGE. I think it's as mean as hell and that's despite the fact that he gave you the loan, which others seem to think proves his generosity.

Anyway, as others have mentioned, the bank might be more accommodating than you think shuold this situation be ongoing. I recently took out a mortgage and the advisor stressed that any problems meeting payments should be brought to their attention so that something could be worked out. And for short small sum loans, a credit union might be more helpful and would not be charging 75 pounds a month.

And I hope you can find your way out of the financial quagmire soon. It sounds really tough. Good luck.

Tbh I don't have a single friend who I would ask to borrow 1k from. That's not to say they couldn't afford it (though lots couldn't) but I just would never ask.

I agree that if I were lending the money I wouldn't ask for the interest / compensation but also if I were borrowing it I would offer it.

Its shit having no money. I worry though about how you're managing to pay back this loan AND pay your mortgage now?

Tbh I think its hard to keep a clear head and be reasonable when you're skint. I think you havr to try and forget what you could afford 2 years ago and try and focus on the here and now.

Of course Sarah, but wherever he puts it when he gets it back he isn't losing 97%.

That said, I would do everything in my power to avoid borrowing from a friend, it can never end well.

never a lender nor borrower be

though that does seem high. My ISA pays me £50pm, for alot more than £1000

I would advise you either (a) borrow money elsewhere or (b) borrow it, and out it down to experience

Honestly OP, I would let this one lie but instead have a real hard look at finances for the next few months, its tough I know x

1 - You asked
2 - He said yes with these conditions
3 - You said yes thanks
4 - And are complaining now it's time to pay him back on payday

Seems to me the answer lies in point 3

I take your point sarahdoctor but while £1000 is a lot of money, I think you were probably looking at quite a bit more in the case of your son? I presume OP has chosen to ask a friend that has a bit of money (rather than someone who would really have to scratch around and liquidise assets in other to meet this very short-term request) and what's more, you and your son looked into it together and calculated what it was going to cost, whereas I have the impression that the OP's friend has pulled a figure out of a hat. When you think of it in percentage terms over a month period, it is truly outrageous.

That's a bit harsh I think Kayano - she is paying it back and she is not questioning her obligation to do so. She's merely asking do others consider it an unreasonable extra payment and the answer is that some do and some don't.

If he's a good enough friend to lend you £1000 then I think you should trust him to be a good enough friend to be honest with you about how much it has COST him to take the money out to lend you. It has COST him £75 - of course you should pay him that. Or do you expect him to be kind enough to lend you £1000, and pay £75 out of his own pocket for the priviledge?
p.s. Speak to your mortgage company, they tend to be much less helpful than the government would like us to believe, but it's worth a try.