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?

Yes but it seems she wasn't annoyed or questioning the arrangement at the time

She now knows to say no next time

Do ISAs really have penalties for early withdrawal? I know fixed term bonds do, but none of my ISAs have. I appreciate that he 'loses' the tax-free status of that money by withdrawing it, but unless he's used up his ISA limit for the year then he can always put it back in again. And if he uses up the ISA limit for the year every year I would guess that he probably has access to 1K without withdrawing it from his ISA.

I think YANBU OP, it comes across as him trying to make a profit from your situation and that's not very pleasant.

Op when money is taken out of an ISA it can't be put back in, you can only ever pay in tge limit regardless of what you withdraw. Whether you agree or not tgat is what he thought was appropriate. How much would it have cost for a payday loan?

When you think of it in percentage terms over a month period, it is truly outrageous.

Fair point Witty but it's quite likely that the friend would have had to pay a penalty on top of the lost interest and if it were a fixed term effort he would not be able to pay it back in at the end of the month, so he would be losing the interest on £1000 over the whole term (as well as the tax relief if it were an ISA). He could of course invest it elsewhere, but he might still not get a matching rate of interest (especially if it's considerably less than his original investment)

Gosh whoever thought the day would come when I would be interested in this kind of thing???

looks like you got a bargin just remember you asked for help and he gave it, it might not have been exactly how you would have done it but he was there for you.

We once lent some money to a friend to help him with his house deposit. We said no need to pay interest, but he insisted, he didn't want to be taking the piss. Perhaps your DH offered to pay interest when he was asking for the loan?

This is assuming his ISA had only £1000 in it. I have a four year fixed ISA with more than a £1000 in it I would lose a lot more than £75 if I even took out a tenner, that is why I get 4% interest because of the tie ins. Sorry you are in this position.

OK, one more point/answer and then I'll leave it, cos otherwise I'm just going to start to sound defensive and also begin to be repetitive. Friend said that it was a cost to cover interest he would lose, calculated presumably over a year, nothing to do with fees to take it out or anything.

It WAS kind of him to lend it to us. He's getting it back with our thanks and the full amount of money that he requested.

Friend said that it was a cost to cover interest he would lose, calculated presumably over a year, nothing to do with fees to take it out or anything.

To be fair, that's the sort of thing I would say as a kind of catch -all, other penalties losses ncluded understood type of thing. Sounds like he failed to communicate what he was really thinking, but not a biggie, still a keeper as a friend I would have thought. Obviously I don't know for sure, but it really does NOT sound to me like he is trying to make a profit out of you.

Good luck!

Well, from the responses above and especially sarah it would seem that it is just about conceiveable that it will have cost him 75 by the end of the year. That's if he definitely had to take the full amount out of ISA - maybe he could have covered part from income etc. He seems to have allowed himself a fair bit of margin in his calculations. It really depends how well off he is I suppose. Anyway OP, you are obviously behaving graciously and gratefully and acknowledging that as a borrower you are in no position to set the terms, so you have nothing to reproach yourself with. I can honestly say though that if a friend did this to me, I would feel stung and it might make me view them differently.

" When you think of it in percentage terms over a month period, it is truly outrageous."

But you shouldn't be thinking of it in percentage terms, because he is not a bank, he is a friend.

A friend who you asked a lot of and who helped you when you needed it.

He's asked to have the costs of that help covered, if you resented that you should have said no.

Accepting someone's generosity while you resent them and cast aspersions on their motivations for helping is an appalling way to behave.

So greedy, grasping, resentful, ungrateful, and such a bizarre sense of entitlement to this guy's money.

The person who doesn't seem to get what friendship is about is you.

You should not have accepted money if you were going to be so chippy and resentful about it.

idid - sorry, but I dont understand what the difference between "thankful" and grateful" is?

Friend said that it was a cost to cover interest he would lose, calculated presumably over a year, nothing to do with fees to take it out or anything.

In your OP you said 'plus fees' - I would imagine as others have pointed out that this is the lost interest, any penalty for early withdrawal (an ISA paying that interest is almost certainly not 'instant access') plus what strikes me as a reasonable amount for the lost tax break on the ISA for the rest of his life. At first glance when you say 4% interest it is a bit of a sharp intake of breath amount (the £75) but actually it probably is the lifetime cost to him.

Another explanation is that he perhaps has done this so that he doesn't end up being constantly asked for loans by people and effectively losing money to sort out other people's cashflow (not suggesting you will constantly be borrowing but perhaps others have done the same in the past).

I think it's unfair of posters to suggest that if he has that sort of money/uses his max ISA allowance he can afford to just suck it down. I use ISAs as part of my 'forever' savings - we're gradually building them up over the years and trying to leave them untouched due at least in part to the tax efficiency - why should he lose out and just because he's prudent with ISAs it doesn't mean he's rolling around in used fifties in his day to day life. You just have to look at the latest budget to see that once you retire you can be in a perilous tax position.

I agree with the others who have said you need to make sure you talk to your mortgage company. If you don't have secure jobs still and are struggling to meet mortgage payments then that is a real warning sign that you don't have enough money coming in on at least a medium term basis.

A thing: you think we can't compare to professional lending arrangements because it is between friends? But surely, if anything, you'd expect friends to want to offer each other better terms if anything than a bank rather than markedly worse ones. I don't get any sense of entitlement off the OP, rather a touch of despair at having to scrape together and additional 75 quid when things are already very very tight.

From the OP's first post - "the loss he would make taking it from his ISA of 4%. He has calculated this at £75 over the 4 weeks, plus 'fees'"

From the OP's most recent post - "Friend said that it was a cost to cover interest he would lose, calculated presumably over a year, nothing to do with fees to take it out or anything."

Either dripfeeding, changing your story or just plain didn't understand the nature of the transaction.

I also think it's important to remember that as the great economist once said, "A grand don't come for free" (M. Skinner, 2004).

xpost, Acekicker.

Interestingly there is a programme on tv about payday loans right now and the average APR is over 1200% for a short term loan!

" But surely, if anything, you'd expect friends to want to offer each other better terms if anything than a bank rather than markedly worse ones."

I would not expect friends to be offering "terms" at all.

You are accepting the OP's bullshit line that she is being charged interest, when in fact she is just reimbursing a friend who helped her out when she (presumably) had few options.

I would expect that someone being done a massive favour would not want a friend to be out of pocket to provide that favour.

That it cost this guy so much to make this money available shows how generous it was of him to make it available.

Lots of people would have said no.

And based on the people who think friends owe them free money, and who would be angry at not being offered it, I think I'm probably leaning towards never lending money to friends.

Count yourself lucky i know people who have paid 100% interest to a so called friend before and £1000 is a lot to lend a friend so you got some good friend there

YABU. If he had any snese he wouldn't lend money at all.

YABU, definitely. Count yourself lucky that you have a friend who is willing to lend you £1000. And you expect him to be out of pocket for it?

So greedy, grasping, resentful, ungrateful, and such a bizarre sense of entitlement to this guy's money.

Exactly.

If taking the money lost him £75, then it is fair for him to pass on that cost.

To be honest though, I would probably charge interest on a significant sum of money lent to an acquaintance, and would get both acquaintances and friends to sign a document confirming that it was a loan not a gift and that they recognise that they have to pay it back. But then, I've seen the problems people have when their 'friend' falls out with them and refuses to repay a loan.

Ask for an overdraft/loan from the bank. Lending to/borrowing from a friend never ends well - though nice of him to offer.

It shows why it isn't a good idea to loan to friends. He helped them out and was supposed to lose at least £75 doing the good turn!