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?

Personally I would not lend him money. Instead I would encourage him to contact stepchange as they can give him help and advice. They may be able to chat to his creditor's and get the interest/additional charges stopped on his borrowings. They will work out a budget plan for him to help him get out of debt in X period of time.

The reality is that you have a good income but you had an expensive divorce. You need to keep what ever savings you have as you don't know what will happen in your future. Also if you invest your savings long term it benefits you more.

I saw what giving money to a friend did to a friend of mine.

A few years ago one of my friends won some money. They gave a friend £1500 of this and bought them on a cheap holiday. The friend was going through a hard time back then.
A few years later the same friend came into money. They never said anything to my friend but suddenly were driving a far better car that was 9 years younger than their previous car.
They never offered my friend as much as a £ 100.

My friend also give them advice and they have refused to listen to it. The friend that got help from my friend now spends hardly any time with my friend and always has an excuse when my friend tries to meet them. My friend has had enough and I know they will be having it out with this friend soon.
My friend told me that they were sorry for helping out this person in the past and that doing this won't make a friendships better. The person you help will just take you for granted and down the line there is a good chance they will let you down.

My friend has put a lot of work into improving their own life and learning to say no more since this happened. My friend told me I have to consider my own life and I am doing things now that will benefit me long term. It not been selfish but its having boundaries in place.

Just lend him the money / you clearly want to
If its just two weeks salary its a drop in the ocean for you
No legal document in the world will save you if he doesnt have assets or goes bankrupt as he cannot “prefer” his creditors to pay you over other possibly higher ranking creditors

So, it's a "vast amount" but at the same time it's "two weeks' salary" for you, and somehow this fact eluded you until some time into this thread, and yet at the same time, even though it's only two weeks' salary, you say you're"actually getting legal advice on how I incorporate my right to ask for immediate full repayment, in such an event".

Maybe watch a few episodes of Judge Rinder to be aware of any potential pitfalls.

You are not thinking of the effect it might have on your friendship if he is unable to repay the debt and the balance of power changes. You may begin to resent him which is not a factor in most 'friendships'.

This

it’s a bit… holey isn’t it

No.
It'll change your friendship and even if you don't expect it back, he's bad with money and it won't help him.
Get him debt advice if that's what he needs.

Op, you can get help with plotting if you google 'creative writing' on Amazon.

Don't loan money to friends, it's a sure fire way to ruin friendships. I've seen it happen too often. Give the money or don't give, but don't lend.

Totally this.
Don't be an enabler
He needs to go through the correct channels to learn money management.
Him asking you is a red flag that he hasnt learnt tbh

thanks all for this advice. I decided not to proceed. Appreciate everyone’s input.

Good. I think you made the right decision.

Haven't you ever watched judge rinder never ever lend to a friend they will then either want more or you end up in a very bad situation between yous and don't get your money back. Stupidest thing I've ever heard. I wouldn't even give my bank card to a friend!

Haven't read the whole thread, sorry, but one thing you possibly could do is support friend to write to all creditors (esp. if they're banks/credit cards) to get them to freeze the interest.

They usually won't do it for more than 12mths at a time, but they do do it, and it can make a significant difference to the repayment time, particularly high interest things like credit cards.

Debt charities will do the same kind of letters, so he could also go that route, but you can just write to them directly, and there are tons of template type letters online he could use.

I'm relieved for you, and think you really have made the right call. This had all the potential to blow up in your face/

So sorry I’ve posted on the wrong thread. Will ask MNHQ to remove.