AIBU to object to my husband taking a large loan for a friend?

[Sefal]

My husband has had a friend for some 40 years, it is probably more accurate to describe his friend as being like a brother to him.

His friend has recently got into some financial difficulties due to a building project costing more than expected. His friend has no way of obtaining money to finish the building project, and without money to finish it, the whole project will need to be ‘written off’, essentially throwing tens if not hundreds of thousands of pounds away and facing bankruptcy. My husband then offered to get a loan out for a lot of money (tens of thousands), to give to his friend on the promise his friend pays it back (plus the interest) when the project is completed. His friend has leant him money in the past, but it has always been from his savings never anything like this. It’s also been small amounts - a couple of grand here and there.

I think this is absolutely insane. Me and my husband both earn very well, but we do not have any savings and have loans and debts ourselves. We have also committed to some very high expenses ourselves for the next few years, and my husband in particular has been very anxious about money, which has in turn made me very anxious and I have been trying to find ways to increase our income. This loan would be hundreds of pounds a month, which as I pointed out, why are we worrying about money when my husband can afford an additional hundreds of pounds on a loan?

I also pointed out things such as:

what if your friend can’t pay you back
what if the project costs more
what if you need it paid off and your friend wants more time
what if your friend falls ill
what if you lose your job
what if you fall out with your friend

Essentially pointing out all the reasons why this is nuts. I also told him that if he chooses to do this, I won’t be supporting him nor will I be taking any notice of his fretting about money or wanting to live frugally. I’ve told him if it affects our lives e.g him saying we can’t afford something, I’ll be reminding him of his ridiculous loan. We’ve had a massive argument because of it.

AIBU?

My dad lent his lifelong best friend 80k back when he was in his 40s to help his friend finish his house projects (he was building two houses one to live in one to sell).

my dad had an agreement written up about the repayment and had the deeds to
the house transferred to him until the loan was repaid.

His BFF fell out with him. He refused to pay back anything other than the interest each and every year. Out of spite he didn’t sell either house and just got his family to live in it or rented it out.

My dad had to learn legal proceedings several times due to non payment of the interest.

40 years. Thats how long it took to sort out. The guy only cleared it a few years ago because they are both in their 80s now and he’s wrapping up his personal affairs due to illness.

40 Years of stress.

get a watertight agreement. What if the hit goes bankrupt. Does the loan agreement still stand? As anyone he owes money to would be wiped off the slate?

Get legal advice. Get the deeds.

Creditors absolutely can’t touch joint property if the loan is wholly in DH’s name. Unless OP has signed to consent to the loan, or guaranteed the credit agreement they can only recoup debt from assets wholly owned by him. If the loan is unsecured the lender can’t force the sale of a joint home or place a claim on OP’s share of the property just because her husband owes money. Even if he was facing bankruptcy his creditors could only pursue his legal share in the joint property, and forcing a sale is complicated. OP’s personal credit score may be affected though, as it sounds as though the repayments would be made from a joint bank account which would link it to the debt.

…. Never a borrower or a lender be ..

What type of madness drives a person who has debt to take on more debt to prop up a friend who has poor credit? It’s absolutely nuts.
Loaning someone money you already have is lunacy, but actually taking out a loan is just daft. What if the DH suddenly lost his job or couldn’t work?
The friend here needs to accept that the project is done and wind it up. He clearly can’t manage it.

I would honestly get divorced. No way would I risk my future financial security for DH's friend. If banks think he is not worth a punt - I definitely wouldn't risk it! What if he drops dead immediately after DH gives him the money?

There is no way in hell I would allow this to happen. You’re married so it’s you and your husband who would be responsible for the loan!!!! No way no way

NO NO NO definitely not, do not let him do it. Tell him if he’s willing to lose that money if anything happens to his friend or the project then let him gladly lend him. You will be liable as your home will be the biggest asset to get the money back if the loan payment fails or what happens if he needs more money where do you draw the line. There’s no saying the bank will lend the money, but personally I’d say no, it would be a deal breaker within my marriage

This would only be the case if the loan was taken out jointly or one spouse has signed to consent to the loan of the other, or otherwise guaranteed the credit. It’s also not possible to secure a loan in the sole name of one partner, on jointly owned property without the consent of the other partner. The financial settlement in a divorce would look at how the loan money was spent - if it wasn’t used for the benefit of OP or the family, the court would very likely rule that DH clear the loan from his share of the assets without affecting OP’s entitlement.

The initial loan may will be the thin end of the wedge. After the initial sum is handed over it'll be- I just needed another few thousand to complete the project and then I'll be able to pay you back. After this happens a few times there will be a row after which the 'friend' will cut contact.

In which case, the friend needs to reign in or halt the project until he can finance the rest. Some builders will loan to clients in some situations to allow the build to be completed (security is the property ie a second charge taken out by the builder against HIS property).

Do not under any circumstances allow this loan to go ahead. Depending on the amount, there’s a strong possibility it could be secured against your own home which would be an absolute batshit thing to do!

Is there other examples of him having White Knight Syndrome?

This is absolutely mad.

It would get between me and being married to him, to be honest.

With all due respect I’d still take proper financial/ legal advice, not on the say so of strangers on the internet! The OP will have no idea of posters qualifications to give financial advice! And when things go pear shaped later she can hardly say well mumsnet told me that I’d be ok 🤷🏻‍♀️

OP says DH proposes to get a personal loan so their property wouldn’t be at risk. A loan taken out in the sole name of one partner can’t be secured against jointly owned property without the consent of the other partner, so OP would have to consent to it. In any event if he defaulted, OP would not be liable to repay the loan from her legal entitlement to the division of assets, and she absolutely can protect herself by monitoring the property details on the land registry website and registering for alerts if there are any moves towards taking out finance secured against it without her knowledge.

It would be a deal breaker for me too because it’s reckless, but if the loan was in sole name OP would have no liability.

You and your husband are both earning, yet you’ve no savings, have loans and debts?

How would a bank give your husband a loan of hundreds of thousands with no security?

Especially to people with loans and debts. in addition to which your husband is stressed about money and you’re both committed to large expenditure.

You both need to get a grip in your own situation. Before even contemplating the friend’s mess.

If the friends project will not complete for another 18 months, with no guarantee of a sale, or guarantee that the sale will cover the friends debts, your husband would be last on the list of creditors in the event of bankruptcy.

The friend is going down, and will take you and your husband down with him.

Absolutely agree. I’m talking from personal experience, not from any professional point of view, beyond the legal advice we had when a family member was in a very similar position. We supported her through what was a very traumatic experience and in that instance a significant loan was in her now ex’s sole name and unsecured - mainly because she very wisely refused to consent to the joint marital home being used as collateral. The legal advice was that creditors could only try to recoup their money from assets solely in his name. When they ultimately divorced, the loan was ongoing and judged not to have been used to the benefit of my relative or their family in general, so her ex was ordered to clear the rest of the debt from his own share of the marital assets.

This!

If the personal loan is refused, have you considered that he might go behind your back and secure this against your JOINT home?

You are not lending money you already have but taking out a loan for someone else...... don't do it, it's madness! If he goes ahead make sure you get it in writing that you are in no way liable for this loan in any way should things go wrong. TBH if he goes ahead knowing how strongly you feel about it, I would consider divorce.

I don't agree with the point here that this should be a business arrangement, because I don't think your DH should lend the friend this money full stop.
I quoted it though because I do agree that it is very worrying that the project has run out of money with 18 months still to go. That doesn't feel like a good investment to me.
I also agree with the point about your DH being a very high earner but you/he still having no savings. Unless there are particular circumstances that you haven't told us about that explain this, it doesn't sound as if he's great with money. Or you either, for that matter.

Bottom line: the project sounds like a money pit. The friend cannot get a loan elsewhere (from institutions that love to lend money!). Your DH is playing with fire.
It's a big no from me. I wouldn't bother telling him you won’t be supporting him or taking notice of his fretting about money or wanting to live frugally. For me this would be a relationship deal-breaker (and I've been with my DP for 26 years, so I would have a lot to lose).

Think the only sensible way out, so that your husband doesn't lose face, or potentially loses his friend, is to say his application for the loan has been refused.

Also, the organisation making the loan to your DH will want to know what it is for. If your husband is honest "to lend to a friend who is not creditworthy to spend on a failing project" he isn't going to get the loan. If he lies, then that's fraud and deception.
Excellent point.

If he adds interest it falls under illegal money lending

@Sefal
Don't let him do it
They may be "brothers"
But he's not yours
You've explained clearly to your husband why it's not a good idea
And if you've a joint account get your own
Plus be mindful of your home, as he'll be thinking remortgage
Tell husband
All monies to his 'brother"come out of his account
Plus still paying his share of debts you both have together
His friend is bad with money, has grand sweeping ideas.
And will never ever pay you back anything like what your husband will give him if at all so will be
Citing they're like family, and he'd have done the same for him
Or
Cold shoulder him completely

Yeah 🤣 oops

Oh what a mess. As everyone else says...no. Taking a loan out to bail out a friend is madness, especially such a large one. If you can't afford to lose it, you can't afford to loan it.