To lend my friend money?

[mscrooge]

Friend is in really bad debt. He’s overwhelmed with interest fees. He lost the money through an investment in his own business, that wasn’t successful.

I do quite well financially, although I don’t have as much saved as I should (expensive divorce).

We just got into a lighthearted conversation about whether I’d be able to lend him some money, interest free, to clear some of the debt, but during the conversation I realised I actually could.

I am completely against either borrowing or lending money but for some reason I feel unexpectedly comfortable with this.

He has never ever been anything but super reliable, money-wise. I let him use my card for a while when he lost his while travelling, and he paid me back every single penny via bank transfer, immediately after he’d made each payment.

It’s a vast amount of money though. A year’s salary for some people. I can afford to lose it but I certainly hope not to!

We would have legal docs drawn up, which would stipulate the terms. I already have the drafts and I’m pretty comfortable with them.

I’m trying to think it through properly before I go ahead as I don’t want to be an idiot.

Assuming he pays me back, the only thing I have to lose is the interest I’d make having it in the bank, but it’s not a big enough amount to concern me.

What am I not thinking of?

How can you demand full immediate repayment if he doesn't have the money ?

Agree with this. Whose going to lend him money when he can’t afford to pay you back, even without the interest that other lenders would charge.

You sound very naive OP, if this thread has brought up lots of extra questions you need to ask him. PLEASE follow the advice here and get him to go to a charity who will help him.

Echo what others have said. Don't lend it unless you can afford to lose it. However reliable he is, he's clearly in a bad financial situation and it may not be entirely in his control as to whether he can repay you.

Also beware that even if he does repay you, you're setting a dangerous precedent: in his mind if you do it once you can do it again.

Using my spare time and spending money to see a solicitor about this would be too much for me, personally, let alone the potential loss of a vast amount of money. Also pointless for the reason @GasPanic identified. I agree with the PP it may be helpful for you to look at your motives here to wanting to ‘help’ him (and possibly yourself).

A while back, under a different username I think, I explained and asked for advice (which I took and have been much much better since!) That I struggled to not spend money I could really do with, so my weekly income is my carers allowance which is less than 80 quid, but often I'd use it to help friends, or worse Facebook sob stories, often homeless people, because I could afford it technically and I felt bad I could go to boots and buy soap and glory shower gel as opposed to a home bargain 90p one, whilst someone was going hungry. And I've given away 100s to some friends who have literally had no food in cupboards, I've bought neighbours kids uniforms etc, to the point it has been problematic.
I explain this because I know, bottom of heart how much you want to help. I'd absolutely be wanting to do this if I were you!
(Please nobody tell me off, I'm much much better than I was at keeping money to my family!)

Anyway a friend of mine wanted to lend £50 last week, but he's got active addictions, but equally he was going hungry and I love this dude, but I said no to 50 and sent over the amount I could afford to realistically lose (and yes he swore on his nanas life he'd repay me and no of course he hasn't!) But my worry would be, about loaning something you can technically afford, is this is one person, what if he god forbid becomes ill or gets hit by a bus, then you're buggered.
If I lose £20 it's inconvenient, if I lose £50 it has an impact on my weekly shop.

I just understand how much you would love to help, it's such a risk though.

Whatever you decide though you're a nice friend @mscrooge ❤

I made a loan of several thousand pounds to help someone get out of debt. I’d seen them go overboard ensuring they paid others what they owed them, so I assumed they would have the same approach to me. We did a payment plan of 3% of their wage. They were sloppy, missed payments had excuses. I finally managed to recover the money over a couple of years minus several hundred pounds, which I decided to write off. The worst thing was as soon as I had paid off the debt they had started running it up again. More than double.
I know your friend has had a failed business investment, which is different to just frivolous spending. In my experience though there’s nothing like money to make you see a different side to others. I would suggest picking up the bill a few times when you go out together if you want to help him get in his feet, but don’t loan money.
Definitely don’t be a guarantor, if he defaults your credit will be damaged and you will be accountable for the debt.

Even back in Shakespeare's day he had it right:
Neither a borrower nor a lender be.

Don't loan any amount of money that you absolutely cannot do without, even with legal documents drawn up, they would be worthless if he can't repay the loan. Absolutely worthless. He could go into bankruptcy and you'd never see your money again.

He's already shown that he cannot deal with large sums of money due to his failed investment. Let that be the only information you need about how he deals with funds that he is presented with.

Don't do it. Don't loan him the money.

OP you're being excellent at acknowledging lots of views, some of which must be quite hard to take in as the tone can go a bit crazy here some times!

I think the main thing is you're going in eyes open, and weighing up all the benefits and risks, all options etc.

This means if things don't go well you'll be much more likely to be okay with it and get through to the other side, because you've acknowledged and calculated that outcome up front.

I think the biggest risk to me is the unknown element on the friendship - money you know the effects of - if you get it back, you get it back, if you don't, you don't. The friendship dynamic of both a successful and unsuccessful loan of this scale - hard to know really. The fact you're already having pretty open discussions bodes well but I'd personally find it hard to risk the friendship - it presumably means a lot to you or you wouldn't be entertaining the money idea.

Another vote for Stepchange here. It’s the most practical solution for someone in your friend’s position.

I’ve occasionally been asked to lend money to friends/family. If it’s a sum I can afford to give, then I just give it. If it’s more than I can afford to give, then I say I can’t afford to lend it. No complicated repayment plans, and I almost never get asked again. Mind you, I’m talking about smaller sums. I definitely couldn’t give or lend anyone thousands!

I bought a house for a friend - plan was for her to pay rent for a few years then when price went up she buys using equity as deposit. The rent repayments got later and later till in arrears then decided she didn’t want to buy - sold at £15000 loss- never again. Very good friend too 🤷‍♀️

@rookiemere
Quote "The friendship has already changed in nature as you are planning to interview him on his spending habits and current debts."

Agree with this. You might find if you ask to look at his income and outgoings he immediately tells you to forget the whole thing. He will be offended. It's a pain when a lender wants this ingo gor a loan - not many people would want to share it with a friend -and shows that lender/borrower is a bad dynamic for friends

@ChimneyPotter
Quote "But it can sometimes work despite all the typical advice not to do it. My parents have lent to me a number of times (think car, rental deposits, a month between jobs...), and I've always repayed, often earlier. We're both very comfortable with it because we're completely up front - it's always informal but underpinned by a lot of transparency. My parents would know my full take home pay, rent, outgoings etc, to see how much is left for a reasonable repayment.

What's the difference, really? Maybe the dynamic of indebtedness might change the friendship now and down the line - its within the normal realms of being grateful for your parents for all they do, whereas it's beyond what friends do?"

The dynamic is different because a lot of parents would give kids their last penny if they needed it even if they knew they would never be paid back. And if the parents weren't paid back and had other kids they could alter their will to even things up. If a friend doesn't pay you back they have taken money from your kids/family.

OP - you say this is a years salary "for some". How much work is it for you? 4 months? 6 months? 9 months? Would you be willing to work for the next x many months and draw no salary but give all the money you earned to your friend? Does that alter how you think- if you focus not on the money but getting up each day with the alarm clock, working hard and doing that all week and for months to give it away. Yes I would do that for my kids or partner - for a friend absolutely no chance!

It’s about 2 weeks’ salary for me.

That said, I still agree with pretty much everything that’s been said here, particularly regarding needing him to pay it back urgently (which isn’t beyond the realms of possibility).

I have time scheduled to chat to him this afternoon.

@mscrooge mscrooge

Quote "It’s about 2 weeks’ salary for me."

That changes everything for me. Lend it if you want to and just write it off it it's not paid back (but lend no more).

That's the equivalent of my lending a friend £700 (2 weeks wages after deductions) - which I would if they were a good friend and generally responsible with money in exceptional circumstances such as the failed business - I would not inspect their finances or see solicitors about it.

Be wary whether this is a friend or a user though.

To the person saying they sent someone with an addiction some cash. I wouldn't send them a penny. I would take them a bag of groceries or do an online shop if they lived far away. There is a reason they have no money for food and will still have no food after having had your money.

It’s 2 weeks worth of salary and It’s a vast amount of money though. A year’s salary for some people. 🤔

If he died, he wouldnt get any inheritance, as he would be.... well dead

What is the emoji for? Is it beyond the realms of possibility that a woman could earn a high salary? Or that some people are on the much lower end of the scale?

Can you just say how much it is?

If is it is 2 weeks salary for you and he is a dear friend, then why not gift it?

Do you know what the average annual salary is?

It’s £33,500

So you are saying that your earn £33,500 every 4 weeks?

my mistake

you are saying your earn £33,500 every TWO WEEKS

So you earn £871,000 a year oP?

Indeed. There's nothing to make any family whose will he might currently stand to inheritance from pay off this debt if he dies.

If you lend him money you are just increasing his debts. That's no favour to a friend.
If you can really afford to lose the money, you might as well just give it to him!

He lost it once. He’ll lose it again.

This is hilarious. I give up on MN, I really do. I didn’t say it was the amount of an average salary, anywhere!

And no I don’t earn £900k a year, but I certainly know other women who do!

The context of your salary explains why the people replying are more concerned about you losing this money than you are. Losing this money will not impact your life in any perceptible way and that information is significant to the decision you make and the risks you are weighing up.

It might be a vast amount of money to most people but it's not a vast amount of money to you and no one should need to weep for you if you lost it. Lend it or don't it's not a big issue in the context of your income.