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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:

hackmum · 04/04/2012 13:31

It's weird to accuse the OP of being grasping - she mentioned that a couple of years ago she lent a friend £2k and didn't even think of charging interest. So she knows that in the same position, she would behave differently from this guy.

But it is weird. I would feel very uncomfortable if a friend asked me for a loan. I suppose I would agree (well, depending on the friend) and I wouldn't charge interest, but I would worry, I suppose, about them not paying it back.

Maybe he just felt better putting it on a more formal footing, or maybe he just wanted to make it clear that it wasn't easy for him to lend money. I'd like to say "think yourself lucky that you have a friend who will lend you a large sum like that" but I suspect the friendship will never be quite the same again.

AThingInYourLife · 04/04/2012 13:47

What she did in the past is irrelevant to how grasping she's being now.

Previous generosity doesn't make it OK to be so resentful of someone who has gone to some lengths to help you when you asked.

cakewench · 04/04/2012 15:54

squidworth above said what I was going to say- if he has a long-term ISA with conditions attached to taking money out of it (and I suspect he does, if he's earning 4%, which is a decent interest rate now, and usually only offered with longer-term investments), then 75 isn't a surprising fee. Banks try to make it difficult for you to remove money from those sort of accounts, as the whole point is they're offering you a higher rate of interest in exchange for having your money for X years. And I personally wouldn't expect someone to pay the fees just to lend me money.

However, I see from your follow-up posts that you do expect this, and you've done this before when you loaned a friend money. All I can say is, people have different approaches to money management. I'm not sure you can fault him for treating this like a business transaction, as it does involve money.

And now you know for future reference what his terms are.

Whoneedssleepanyway · 04/04/2012 16:00

Whenever I have borrowed money off my dad he has always charged me interest, it works well as we meet half way and he gets a better rate than he would get in a bank but I get a lower rate than I would from borrowing from a bank so win win. I don't think you can complain about the terms someone wants to lend £1,000 to you on if they are donig you a massive favour.

skateboarder · 04/04/2012 16:34

Having removed his 1k from the isa he has lost the ability to replace it in a tax free wrapper. This fact along with a n early withdrawal fee and loss of interest may quickly add up to £75.
Sorry you are in this position op. I think your friend has been fair though.

starfishmummy · 04/04/2012 16:46

I think skateboarder is right - if the money was taken out of his ISA, then he won't be able to put that back because we when you repay him we will be in a new tax year. So when he reinvests he might not get the same rate.

FantasticDay · 04/04/2012 16:52

Neither a borrower nor a lender be;
For loan oft loses both itself and friend

schoolgovernor · 04/04/2012 23:39

I think some people are completely missing the point. The very kind friend isn't asking Op to pay interest on the money he loaned them. He is asking them to reimburse him for the money (interest) that he LOST by taking the money out to loan them, which is rather different.
To say that he should just ask for the £1,000 back is rather like asking him to loan them £1,000, then spend £75 on treating them to a slap up meal as well.
I think Op is being extremely unreasonable and hope that nothing has been said to her friend that will give him an inkling of how she views his request.

bobbledunk · 05/04/2012 01:14

Why should he be short of £75 for doing you a favour by lending you money?

yabvu

bobbledunk · 05/04/2012 01:15

and ungrateful...

aurynne · 05/04/2012 01:22

The problem here is that, at the end of the day, a friend took you out of the shit and did you a big favour, but the only thing you're going to remember is that "he charged you interest". You are actually going to feel resentful towards him.

I find that very sad.

Mimishimi · 05/04/2012 02:18

I would never, ever charge interest to a family member. I would, however, draw up a contract for a payment plan and expect them to sign it if the amount involved was a large sum. For a close friend, it would be a bit trickier. I wouldn't want to make any money off the loan but at the same time, I wouldn't want to lose any money that I might have made off that sum. If he has his money tied up in accounts which incur a penalty for withdrawal and which can't simply be replaced when the loan has been paid back (thus he will not make money on that sum for the duration of the account), then I don't think he is being unreasonable or a bad friend. If he was taking advantage of the situation to not only recover his losses but also to make money, then I don't think YABU. I would be disappointed by that too.

I feel almost certain he has done this to discourage you from borrowing from him in the future. It is a very awkward position to put a friend in especially if he is aware that you once thought nothing of dropping 75 pounds for lunch on a Saturday. Really???

exoticfruits · 05/04/2012 10:06

I think if anyone was asked 'would you like to pay £75 to do me a favour' most people would refuse!

accountantsrule · 05/04/2012 10:14

Its a really difficult situation with no clear right or wrong answer as does depend on who is lending and how close they are or how 'well off' they are maybe.

My MIL lent my DH some money when we first got together and she charged him interest as she used the £17 a month interest to top up her pension so it was part of her income. This is essentially ok but I know my parents would have not expected us to do this and they would have managed without the £17 but it was her money so she could do what she likes and she was doing him a massive favour lending him it when he was desperate and it meant he could pay it back as soon as he could without any penalties etc.

In your situation OP it would cost your friend money to lend you the £1000, if its a 4% ISA it is likely to be fixed for 2 years (all the flexible ones are around 3%). £1000 would earn £81 in interest over 2 years and if you withdraw early you lose the higher interest rate for most of the term so £75 sounds pretty reasonable. Why should he lose out to do you a favour?

MunroMagic · 05/04/2012 10:35

I think YABU. He is not making money from the loan but from the sounds of it just covering the loss he would incur in withdrawing the money.

Money invested in an ISA can't be reinvested once withdrawn. This means that he will forever lose the tax free interest on that £1,000 (assuming he rolls forward his ISA accounts year on year).

He is doing you a massive favour in lending you the money and it is probably a big deal for him. ISAs (and any other tax free investment) are generally the last source you would look to if you needed cash. He probably doesn't have that much spare cash kicking around if he has to access an ISA in order to lend you the money.

I don't think £75 would cover the loss of interest over the longer term.

PooshTun · 05/04/2012 12:36

A couple of years ago I borrowed £30,000 from a mate for 6 months. He refused any interest. What a mate.

Anyway, I don't think that it is unreasonable for the OP's mate to add on the interest. Its not as if the guy is making a profit and, from what you have said, your family and other friends aren't exactly lining up to lend you money, with or without interest. Sounds like a good mate to me.

SarahDoctorIndyHouse · 05/04/2012 12:41

A couple of years ago I borrowed £30,000 from a mate for 6 months. He refused any interest. What a mate.

PooshTun are you Danny Baker: I ask because he said eaxctly that about Chris Evans on Desert Island Discs a few months ago! .

SarahDoctorIndyHouse · 05/04/2012 12:43

PS PooshTun if you are...I thought History Repeats Itself absolutely rocked: a more than worthy fill-in for 7-Day Sunday

margoandjerry · 05/04/2012 12:46

You are actually asking him to lend you £1000 and give up another, whatever, £40.

It's not at all unreasonable if he has to dig into his ISA for this (and once you've taken out that cash you can't put it back in the same ISA so he'll have lost that slice of tax free isa for good).

If he has to dig into isa savings for this he may not have other free cash floating around. You should be grateful to have such a good friend, not bitching about it.

PooshTun · 05/04/2012 13:06

No, I'm not DB

SarahDoctorIndyHouse · 05/04/2012 13:10

PooshTun didin't seriously think you would be. But you have one bloody generous friend there! Can I adopt him/her

DueinSeptember · 05/04/2012 13:29

I've got a couple of ISA's which are fixed at a higher rate for a set time period (4 and 5%) but to access them I would have to pay up to 270 days interest on the whole amount of the ISA depending on how much time was left before the fixed rate was over. I think it goes down year by year.

So if I wanted to withdraw £1000, it would cost me much more than just the lost interest iyswim?

So maybe your friend has taken a financial hit to help you.

Having said that, if a good friend was in dire straits I would help them out by offering the money without mentioning the extra costs or interest. But we'd have to be pretty close before I would consider it.

MorrisZapp · 05/04/2012 13:47

Op, YABU but I'll lay off as I think you've got the point now.

Talking of grasping though, this thread has reminded me of an episode of SATC that made me so furious!

Carrie was struggling for cash (spent too much on shoes and handbags, couldn't pay rent), and moaned to her friends about it. They were sympathetic and offered to help, apart from Charlotte (the richest one) who sat silently.

So Carrie then FELL OUT with Charlotte - who had been brought up never to borrow or lend - and only forgave her when she sold her old engagement ring to help her out. And the episode ended with Charlotte 'learning' about the true meaning of friendship!!!!!

I still fume at that episode.

DrHamstertoyou · 05/04/2012 13:48

OP YANBU. Seems like a lot of people have got really tight friends. I think if you have to ask for a favour like this then it means things are tough and a real friend wouldn't want to make any gain and would let their interest go for a month or quietly stump up the fee for removing money if that's where the £75 figure came from. I would.

TheNightIsDarkAndFullOfTerrors · 05/04/2012 13:58

People are very tight, I think.

A toothless young-ish man accosted me on the street the other day. He asked very politely if he could trouble me for 50 pence for bus fare to the next town if I had it.

I did have a fifty pence piece but I gave him a two-pound coin. He looked shocked, smiled and thanked me.

In the same street last month I was putting the rubbish out, left the door on the lock but the wind blew it shut and jammed it. My disabled four yo son was on his own inside and not one fucker passing by would let me use their mobile phone to call for help even though I told them that this is where I live and I would pay them back.

If I were rich enough to have a grand to spare it would be no different to a tenner, or a pound.

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