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?

So God knows how much he's already borrowed from friends. You'll all get burnt. If the project is property, the market is crap at the moment. You've no idea of how much secured debt he has, and what number in the line up of dumb friends giving him tens of thousands you sit. If it's the difference between him making a profit for all his work, and paying back unsecured loans what do you think he'll do? Honestly, this is madness. Hopefully nobody will loan the money to your DH. Remind him strongly that he has to be honest about what the loan is for or it's fraud.

I wouldn't even say that, his share should come out of his own pocket. If he can't afford it then go without him.

So this friend is a person who is notoriously bad with money, has borrowed from you before over the years, has started a massive project without costing it properly and hasn't got the funds to complete it, has extinguished all ways of borrowing more either from banks or other friends, is hoping that once finished the project will pay dividends and he will have enough to pay everyone back and still make some profit for himself.
If it is such a big project then he probably already owes builder etc money. If he cant get credit to pay for more materials then he has not yet paid for what he has already had.

He has made HUGE mistake starting this project and now he is willing to get friends into debt to help him.

If and when it is finished there is no guarantee that it will sell at a price that will cover all the debt he has accumulated and if it doesnt and he realises that when he has paid everyone back there is nothing left for him you will not see him for dust.

Even as a high earner the banks will still want some sort of security as you have already got loans and that security would have to be your house. So this friend is willing to see you homeless as well if it all goes wrong.

He is not a friend.

Is your husband going to repaid the £30k PLUS the interest he has incurred on the loan he takes out? That would be the absolute bare minimum that he should expect. Does your husband realise that he would then have to pay income tax on that interest? If your husband pays income tax at 40% or 45% the friend should gross up the interest element to cover that.

Entirely trust based is madness. What happens if the friend falls off a ladder and dies? The loan dies with him if nothing is in writing. what if he gets a head injury and needs care. his asset will be sold to pay for his care. There are 50 other similar scenarios in which DH will have to kiss goodbye to that loan. He needs to get a charge put on the property at least.

It's scary how delusional some people are when they have responsibilities themself.

The housing market is awful and things are taking YEARS to sell at massive losses so I wouldn’t touch this with a barge pole! If the friend will put your husband on the ownership as the % he’d loan him - plus interest!!! - but not liable for anything and that will also involve £ as you need a solicitor to draw up an agreement but then you would to lend the friend the money too! - then that would be better if he continues to go ahead

Has the friend actually had it valued? In its present state and for an idea of when it’s finished? If your DH is really considering giving ( or best case loaning) the money at least he should be able to actually look at the figures, what’s owed already what’s needed to finish etc. Crucially what it’s actually worth. It’s a difficult conversation to have with his mate but he might be doing him a favour by going through it all with him.

Since your DH is so emotionally invested in "helping" his friend, can you not bypass your DH and go to his friend directly to tell him that your marriage is going to be over if he continues to push your DH for this loan? (Or something similar.) If there are multiple unsecured loans this person is getting from multiple "friends" there is very little chance that your DH's loan is going to ever be paid back.

The friend is going to go bankrupt 1000%!!! He can sell the property/project as it is now
partly completed if it’s actually worth any money!

Because you say your DH has been fussing about money and how you need to save, yet is now willing to take on a debt with monthly repayments.

This makes me think that the DH has ALREADY LOANED his friend quite a lot of money as it is, and the friend is telling him that lending more is the only way he can repay the first lot. The DH is thinking that he will never get the initial sums back. The friend has persuaded him that he will get it all back if he tides the friend over this "final" hurdle.

That's the only thing that makes sense to me. Why else is the DH being so reckless? You are both on high salaries but no savings and debts and he's always on about cutting back on expenses?.

I think you need to use that experian link a kind pp posted above. And then have an emergency finances talk. I'd go back since the friend started the project to find out exactly how much of these unofficial loans your DH has already made over the project life span. And if I were him I would rather lose £30... than £130k (for eg) Its the old sunken costs fallacy isn't it.

Also, every pound that your DH lends and loses to this friend is a pound taken away from your Children's futures... If they need to fund future studies, braces, medical conditions, deposits for flats... your DH needs to think how much he could be depriving them of for the sake of this friend's unlucky property gamble. Your DH is the only person life in the friend's life who can lend him these sums.
Your family is not a bank or a charitable institution.

I hope you find a solution OP x

I do feel for my husband’s friend, he has helped us in the past and is a wonderful person, I care about him a lot, I don’t want it to come across like I am totally heartless. It’s just that it’s A LOT of money we don’t have, obtained through a loan on the promise it will be returned but with no real plan as to when or how (and even with a plan it would still be a firm no).

Do you have a trusted financial adviser you could discuss this with, who could perhaps make him see sense? This is a crazy situation x

Is it possible the friend has a drug or gambling habit or is in some kind of trouble? £30k isn’t much to finish a project. Is he a flight risk? Con folk then do a runner? Wouldn’t be the first. Has he a new partner he’s trying to impress? Just very odd all in.

It sounds like your husband is so desperate to help friend out of a hole that he's not seeing sense. Many building projects end up failing because of money and having to be abandoned. It really isn't a sure thing to throw more money at it and bank on selling later (obviously you know this).

Maybe it would help if you were to meet the actual issue, which isn't the money but the emotional side of not wanting to watch his good friend drown, especially as friend has helped him when he could. Ask how friend is, what's gone wrong to get to this point, consider whether you can help by making a spreadsheet and go through finances with worst case scenario. It's slightly fake as your aim there is to get him to see sense rather than you actually consider it. Does friend have a clear plan for the money with evidence that it would be enough (with quotes etc) so there's no risk of it getting absorbed into an empty money pit. You wouldn't want friend stuck with more people (you) that he owes money to and no way to repay as he'd be in an even worse position than now, plus it would hugely affect the friendship. Again, you're not actually after this info because it doesn't change anything for you, but going in gently like that might help DH see the craziness.

Problem for your husband is that either way the friendship is soured; he lends the money and it’s lost forever so friendship ends in anger or he doesn’t lend and friendship ends in resentment as friend will think oh well I supported them when they needed it but they can’t help me? I know the amounts are different but the principle in his head will be the same. So I do get that your husband is probably feeling rubbish all round. Plus they’ve both got the ‘what if’ mentality - what if the project works out and they both end up happy and best mates and money back in your pocket, dream project done etc. it’s hard to see past that o guess

I would say no because I’m risk adverse but if my husband really wanted to I’d struggle sticking to my guns. We do have savings though and don’t stress about money whereas your husband is telling you to tighten your belts on the one hand but then happy to add £700 a month loan repayment to the mix?! Very confusing. Ask to see a detailed plan of how he intends to finance the loan! That would be interesting.

So "friend" needs 30K to finish but has a vague project end date of a year, maybe 18 months?

Come. On. Now.

I wouldn't be surprised if your husband has already given him some money and it sounds like you two are already overextended.

He's looking at committing fraud and he's prepared to risk your home. (Hopefully you aren't). That shows a mindset that doesn't prioritize you or the kids and their future, but his friend.

Get yourself to a lawyer ASAP. Get your info, divorce papers drawn up or whatever your process is, let him know you have them. This is that serious.

I agree with you, it would be madness for your husband to do that. And being married you are one entity in law financially so you could end up being responsible down the line if it goes wrong. Major decisions like that should be joint in a marriage, you don't agree so it shouldn't be happening.

Even when the property is sold, you don’t know if he’d be able to pay you back. He already has other loans which will come before you in the queue - possibly secured on the property which is being built. You have no way of knowing anything will be left over when it’s sold.
Also, desperate people (and I imagine this friend is desperate) are seldom truthful. They will say what they think you need to hear in order to extract the cash, without a thought as to how they’ll pay it back.

I spat out my tea! unsecured borrowing from multiple lenders -he’s on the road to bankruptcy and wants company on the way. Clearly the reason the bank won’t lend to him is because he is so far in the hole at this point it’s not viable as a project any more - they won’t take the risk and neither should your husband or anyone else. Is your husband financially naive????

Try your best to talk him out of it. If he still wants to go ahead, then give him an ultimatum. It seems this friend/brother has been using your husband as a financial crutch over the years and that's possibly why they've remained friends for so long: the friend simply knows your husband will always be around to lend him money when he needs it.

When I was a teenager, my dad loaned A LOT of money to a 'friend' overseas. The guy needed the money to finance a property development.

Anyway, let's just say that after the friend received the funds, the excuses came thick and fast. After a while the 'friend' told my dad that his wife had cancer and it was one of those situations where it became unbearable because short of hiring a PI and finding out if it was true or not, it put my dad in a really bad situation. I can't remember exactly how long the friend took to pay back the loan, but I remember that when he did (5-10 years later) it was with zero interest.

My dad really learnt from that whole experience. It put loads of strain on him and his health declined. Suffice it to say that he and the 'friend' no longer talk anymore

I would seriously advise your DH to steer clear of it.

I have been in your exact same position and posted about it 6 months ago. The only difference was my dh wasn’t charging him interest and the wife is a friend of mine. Dh’s friend asked him to keep it a secret from me (which he didn’t).

You can imagine the replies I got.. much the same as yours. During the period of the loan, I would hear from my friend (who didn’t know about the loan) about their latest trip to Disney and all her shopping trips. Another difference was that the money was being leant from dh’s company so it didn’t impact us on a daily basis.

In our case the loan was paid off (I checked with our accountant) more or less on time, even though he defaulted a couple of months.

In your situation you are going to have to explain to your dh that you are a partnership, he isn’t a single person and it is totally unreasonable to make a decision that will impact you without your agreement.

Can you speak to the friend yourself and explain your sorry but you don't have the money and can he tell your husband he doesn't need it anymore as if this goes ahead he'll be ruining his best friends marriage

This. If the banks won't lend it to him why on earth should your DH?

It's not necessarily a money pit though. The OP needs to check the books carefully. VERY carefully due to the red flags.

Years ago a couple of uni friends did something similar. One was working on a build project for a BTL but got his costs wrong and was at risk of losing everything. His best mate helped him out with the shortfall and essentially became a business partner (as this wasnt being sold.) 15 years later after marriage and kids, they sold off the project and both walked away with a huge sum of money.

The OP just needs to make sure that they get the full sum back and ideally interest and more. If that can't be guaranteed then saying no would be sensible.

So "friend" needs 30K to finish but has a vague project end date of a year, maybe 18 months?
No, if you read the OP's posts properly you'll see she says he's asking to borrow sums of money from various people, INCLUDING 30K from the OP's DH.