Friend asked dh for 2 year loan

[ParsnipPuree]

Dh’s closest friend broke down to dh and told him he’s in trouble. Owes £25k to a friend who now needs it back. Dh offered to help on the basis it’s payed back in instalments every month for up to 2 years.

I am friends with his wife who is oblivious. Her dh won’t confide in her. She doesn’t know there’s a problem so will carry on as normal. I don’t think she’s a big spender but that’s not the point. They had a week away shortly before her dh and mine had this conversation.

Im angry because if there was a medical situation they couldn’t cover, that would be one thing but they’re obviously living beyond their means. Dh is taking the money out his company so it doesn’t affect me. If my friend knew she’d be mortified.

There is a strong whiff of lies about this.
I wouldn’t be surprised if he has a loan from the other friend (which he’s paying back in instalments), but he now needs another loan (to pay back in instalments). I reckon his debt is just multiplying, and soon the instalments will be unpayable as his wife continues to spend, in blissful ignorance.

Tell DH to pay the other friend back directly, rather than it going through his good friend. Otherwise, it simply won’t reach the supposed target.

The choice to lend is mainly your DH's, as its his company. Although most couples in practice make these decisions together.

But the decision to lie/not disclose to his wife is yours, and a poor one in my opinion. You and DH are enabling dishonest financially irresponsible behaviour.

How would you feel if you were his wife and you found out many of your friends (I can guarantee your DH won't be the only one he has asked for money) knew your family was financially struggling and hadn't talked to you. I would feel humiliated, and never trust any of you again

So he borrowed from someone / an institution and couldn’t pay them back, then he borrowed from someone else to pay back the institution, then when he couldn’t pay back that person he wants to borrow from your DH to pay them back, will he have to borrow from someone else to pay your Dh back

This sounds like long term financial bad management, he needs to find out where he is going wrong and deal with that issue or else he is never going to get out of this

Does his wife work as he seems to be under a lot of pressure if he is crying from the stress of it

It's too much risk unfortunately

If he can’t discuss this mess with his wife he is an untrustworthy narcissist. He needs to let her know that they are spending beyond their means. He’s treating her like one of his children. They need to spend less and she should look at working. I wouldn’t rule out lending him money but he has to be more honest and realistic and give up his Mr Bountiful self image and he and his wife need to look at how they can live within their means

You don't sound as if you have much agency in your marriage if your husband gives away marital assets without your agreement.

The only thing that you can do to try and protect your name in this is to tell your husband you will need to see that payment every month with your own eyes and the minute he defaults, his wife is being told.

He has children.
It really is unconscionable to keep his wife in the dark about the shit show going on in the background.

Guys like him rob peter to pay paul when they are in too deep. This will come out. She deserves to be told.

My friends neighbours husband took his life in 2008 and what he left behind for his poor wife to deal with was truly shocking.
He left her in enormous debt, the whole business was leveraged up to the hilt.
Bank took their house within months, remortgaged multiple times.
Traumatised children, still traumatised in their 20's.
Her parents and family paying her rent and bills, and food during a tough recession.
She was, is, a lovely woman I believe, who trusted her husband.
She has paid a horrendous price for her trust and so did her children.

Yes but the money isn't going to a Director, its going to a Directors friend.

Debt charities help people who are struggling with debt interest to negotiate with credit card companies and mortgage companies, to reduce payments to a manageable level.
Your DH's friend ought to try this first before he stuffs your DH's money into the debt hungry incinerator ..It's not enough to just keep feeding the beast. He has to take steps and advice to restructure or the situation will just get worse and your DH will have bought him a month or two before DH loses the entire sum. That includes not hiding it from his wife who is blissfully unaware of their debt crisis and would probably like to know so that she can economise in some way.
However, it doesn't sound from your posts as if the DH's friend is even giving your DH the full facts... which makes the loan extremely risky.

You say it's not your money. But it is your family's money. A £25k hole in your Dh's business (which is presumably taxed) is a sizeable amount to lose and could become a problem for the business in future given what is happening on international stock markets, the effect it will have on interest rates and inflation. This is an unpredictable climate for business and you don't know what call there might be on your DH's business in the future where he will desperately regret giving away a significant amount to someone who is very unlikely to pay it back.

Doesn't your DH have an accountant who oversees the business who could outline the risks for him?
Maybe a good first step would instead be to pay for a few hours of time with an accountant to help him navigate this mess and restructure his debt interest.? He didn't borrow from a loan shark did he?

Typo. I meant to say... Your DH could make the Friend sit down with an accountant to discuss how to restructure. That would actually be more helpful than just giving him more money to burn.

It’s fair to say the situations are different, however I do still think it’s shared money if it was earned since your marriage. Unless you’re properly rich (ie several million) he shouldn’t be lending such a huge sum without you agreeing. It’s a lot of money we’re talking about.

I can also guarantee as soon as said friend gets the 25k, the next announcement eill be from the wife that they're going on a lavish holiday!!

This sounds like a terrible situation. Instead of borrowing money off friends, they should be living within their means and the wife should be getting a job. How bloody entitled of them both.

Doesn't matter I suppose? If it goes to Directors Bank, and he spends it on whatever he likes? In this case he's giving it away to his friend.

No it would not matter in that case, it would be treated as if OP's H had taken it as salary, dividends or a Director Loan and taxed appropriately
What OP has described is her H's company lending the money to the friend direct without it going via his own personal account
I am not sure how that would work when filing tax returns etc

I think you are all being a bit harsh to OP's dh.
He is a nice guy. He likes to help people out when they need money. I don't think he should be villanised for that.
The world could do with more nice people who are willing to help people out of a hole.
Don't we all
moan about the rich getting richer etc and here is someone who is actively willing to spread his money round to help others.
So I applaud his intent.
My parents are in a similar position and have lent/given money to friends and familiy over the years. (They are always very business-like about HOW they do it.)

On the other hand I have no sympathy for the friend, and the only way to deal with this situation is to go into it with eyes wide open and in a business-like way.

assess if dh can afford to never get the money back
sign tight contracts
set up direct debit/standing order so that the money is paid
etc etc

Personally, I would make telling the wife part of the contract, if the wife doesn't know, then no money.

I strongly suspect that there is more going on, gambling etc. No-one in fincance gets accidentally 24 grand in debt, unless there is an underlying issue.
And if there is, the money is never coming back.

and YES to dh paying the other friend back directly.
That will soon unpack whether this other friend exists or not.

Have you and your husband and the friend actually worked out an sort of repayment analysis.

Very rough figures for example.
25k loan repayment
20k mortgage repayment (estimate)
20k utilities/food/other standard costs
65k total
Therefore 65k net income required
Roughly 130k gross income

Is he even earning enough to even be able to repay? Then you have to assume that even if he is, that it is also spending little enough to repay you guys.

Absolutely this.

I've got to say that I find it inconceivable that someone who's made so much money from business that they can blithely spare £25,000, when it seems blindingly obvious that it's a poor financial decision, is so naïve as to imagine his friend can afford to pay it back, or to make lifestyle changes in order for that to happen, let alone regularly as agreed.

So DH is loaning the money fully anticipating that it won't be repaid then? because if he was certain it would be repaid as agreed per this contract, then the charge over property would be irrelevant.

I don't think anyone has said he isn't nice, only that he's silly.

Well, I guess that's for DH to sort out, having to pay tax on this gift he's giving this man.

Every time you post OP makes it sound worse.

Just accept that your husband is giving a gift of £25,000 to his friend.

A gift from your marital assets, that could actually cost your husband money in tax, and lost interest earnings.

Unless you step in now, you will never see that money ever again. So, if you're happy to be £25k+ down then great.

Otherwise it's would take you 10 seconds text the wife RIGHT NOW. "Hey Friend, did you know that your DH is borrowing £25,000 of my DH?"

But that is my point
If I am understanding OP correctly her H will actually NOT be lending this man money, his company will.
There are strict rules about what you can and can't do with company funds and how you can or can't extract them from your Business. A LTD company is an entity in its own right, its not an extension of the owner and I can't just take money out myself without it being accounted for and tax paid on it, let alone lend money from my company to someone completely unconnected to it. If The company lends this man money somehow The Company will have to be paid back and there would have to be a proper paper trail for that. If The Company lent the man money and The H was paid back personally that could be tax Evasion I think
As I said I am NOT an Accountant so maybe there IS a way of doing this but having being in Business for almost 20 years I can't think what it could be.

Of course companies can make loans. How do you think banks work? 😂

If the loan is made to a shareholder, employee or one of their relatives/a connected party then there are tax implications because it’s clearly a scheme to avoid paying tax on their income (and there are specific rules on this) but a company can absolutely make a loan to an unrelated third party (as defined in tax laws). A friend who is otherwise unconnected with the shareholders is most likely fine. (Caveated only because I don’t have all the facts.)

That is a pretty hefty tax risk at 40-45% if taken as personal funds, if unpaid within the tax year it becomes a 35k loan!
If friend is regulated his employer or FCA will do strict checks on debt risk, how has he been getting away with that? It doesn't bode well for the industry if finance professionals cant pay their debts or manage their own money. I wouldn't be taking anything he says as the truth. The bottom line is op husband probably knows he won't see the money back and is ok with that.