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?

I wouldn't rule it out 100% BUT...

This shouldn't be a mates loan. It needs to be a business arrangement e.g. your DH is investing in a building project and his loan will be as a percentage of the build cost and therefore a percentage of the profit.

E.g. build cost £400k. Your DH is loaning £40k so he now owns 10% of the build. If the build then sells for £600k, your DH gets £60k back.

To do this he needs to sit down with friend and go through the business plan and look at costs and time lines. Running out of money with 18 months still to go is worrying and I'd question why this happened. Very bad planning usually...

And as your DH is a very high earner but with no savings then this also implies he isn't great with money either.

Your DH is insane. Can the friend afford the replacements each month? Can anything legal be drawn up eg you get the money back when the house sells?

This is insane.

No true friend would ever expect another friend to get into debt. Repayment is not guaranteed. All jam tomorrow promises. If it all goes pear shaped the friendship is dead anyways as likely his ‘friend’ will be too busy feeling sorry for himself and his own losses to care about your DH’s.

Sounds like your DH has already agreed. He’s likely feeding off all the gratitude from said ‘friend’. +He’s showing you if it comes to a choice between upsetting you or upsetting him, he’d rather upset you.

You’re not wrong. This loan is madness, the project might still not complete or take ages to sell or sell at a loss.

To echo everyone else this has disaster written all over it. It is also showing shocking disrespect to you and to your marriage and I’d be seriously questioning my future

Who is going to make the monthly repayments until the property is sold?

What if the property doesn't make as much profit as expected - where would your DHs loan lie in the priority of repayments? i.e. will all other debts be repaid first? What if there's no profit left after those loans have been repaid?

If your DHs loan is defaulted upon for any reason then yes, as his wife, you would also be financially liable and it would impact on your credit rating.

If he does go ahead, I would insist on him setting up a formal legal agreement.

Your husband is being an absolute fool.

Your DH needs to tell his friend the bank wouldn't agree the loan due to his and your other financial commitments. He saves face and the friendship remains.

I would never agree to lending a friend or anyone money like this, it would stop me sleeping.

OP, your DH wouldn't do something stupid like get the loan anyway even though you have categorically said no. If he did I would divorce him as all trust would be gone and knowing he put his friend before his wife and children would be the end of the marriage for me.

I always think if I cant afford to lose it, I cant afford to give it.

And DH cant afford to lose it if its a loan. Which he of course should have your agreement to take out as the monthly payments will impact your standard of living regardless of why he wanted it.

Now the friend.. why cant he get his own loan? Runs a big company turning over what sounds like close to millions.. why cant he get a business loan or a personal one? What does the bank know your DH doesnt?

Surely friend had a financial forecast? Why is he so under budget? Where are the other investors?

Tbh i might be telling DH this is a deal breaker.. that if you had it and it was a reasonable amount fine but you dont and it isnt

I’d be very surprised if he can get an unsecured personal loan for over £50 000 is it under that amount?
This is bonkers however if he insists on going ahead and he can’t get an unsecured loan against joint assets without your consent. I’d be very vigilant about paperwork arriving at the house and checking what is secured against the property if owned via land registry, I think you have to pay a small fee.
If he goes ahead with an unsecured loan make sure your money isn’t going into a joint account, agree on a division of money for bills etc and pay that into the account.
I don’t see how this won’t affect joint finances and your standard of living, it sounds like he’s determined to go ahead. Keeping your money out of the equation at least means you have some way of trying to build savings but I’m not sure long term especially if the friend defaults on the loan how you’ll be able to forgive him choosing to do this over your expressed wishes he doesn’t.

Jeez oh.

Is there or has there ever been a Brokeback Mountain element to this friendship!??

Makes absolutely no sense.

Who in their right mind prioritises a friend over their spouse jeopardising the family future and security over a high risk project?

OP you should let your DH read this thread, and his ‘friend’.

if he’s going to do this he needs a loan agreement drawing up by a solicitor in case it all goes pear shaped.

So in the meantime youre paying the instalments not the friend with the cash...

A bank won't lend to this friend even though he could put the property up as security. That's huge. It's not just that they think he's a bad credit risk, they don't think there's enough value left in the property after all the debt secured against it is accounted for.

Yet the DH thinks there's going to be enough left over to repay an unsecured debt? He'll never get it back.

You DH is in a difficult position, this is his best friend almost brother about to be bankrupt and possibly lose everything. On the other hand you don't have the cash, but sounds like in the long term you can pay back a loan to cover it. The big problem is will this be the tip of the iceberg you really need to see the project and what still needs doing, will the few 10s of thousands realistically be enough? Building projects are notoriously more expensive than expected, has the friend done this sort of thing successfully before or is this a one off? Has his friend got any source of income so he could pay the loan payments? And just needs the lump sum upfront.

It is a really bad idea, but I can see your DH really feels he can't let his friend, nearly brother down. It sounds like you are going to hate him if he does it and he is going to blame you for his friends bankruptcy if you persuade him not to. Hobson's choice.

That's even worse,I read it as your husband gets the loan, and his friend from day one pays the monthly repayments till the term of the loan is done.
So iam I right that,your husband is paying the repayments and when project is sold your husband gets a lump sum. Say your husband borrows 40k, his friend cant just give him 40k back,there will be interest on a 40k loan,it maybe 60k by time it comes to fruition.
This has disaster written all over it,what if the build doesn't sell, with current col crisis people arnt moving,houses arnt selling

The bank know they wont get their money back if they help him.. why does your DH know better?

And yes as his wife this WILL affect your credit and you could be liable if friends project falls flat anyway.

Id be telling DH we cant afford a second mortgage for your friend.. we dont have it.

And while id be honest and say no, he could always say bank refused. Which it might if he tells them what its for

Sounds like it.

Does the snake oil salesman friend work? Or is this project his FT post? Is the loan to cover some of his living costs? Does he have a partner? Maybe others have already bailed him out…

It will be galling to see the friend with a fancy car, house or going on holidays in coming months (if applicable) that could be sold and used to fund the project to completion instead.

The friend is a CF letting your DH do this.

No, he doesn’t do it.

A partially built property really has little value, banks won't recognise the potential value when completed. There are some companies that would do a short term bridging loan for a development, but they would require other security like a lien over another property to cover the risk and they tend to charge high interest.

The friend sounds like an utter loser. It will end badly. AVOID at all costs. What on earth is he thinking??!

It is a really bad idea, but I can see your DH really feels he can't let his friend, nearly brother down. It sounds like you are going to hate him if he does it and he is going to blame you for his friends bankruptcy if you persuade him not to. Hobson's choice.

But the DH does have a choice. And the friend’s bankruptcy would NEVER be the OP’s fault.

OP, if you gave him an ultimatum, ie he chooses the loan or your marriage, which way do you think it would go?

Why can’t the friend sell the unfinished building now? Cut his losses? I have two 40 year plus friendships . I would probably help with an amount that wouldn’t put my whole life at risk if they couldn’t pay back but my mates are more grounded than this friend sounds and wouldn’t get into this situation anyway.

I would seriously divorce over this

Me too. All large financial decisions should be joint ones. How dare he impact you and your family in this way? It’s utter lunacy to lend when a bank will not.

I got a cold chill of fear through my heart reading the OP and I can well imagine that clamping fear hanging over you every single second of every day that Loan remains outstanding. Especially if you've got your own consumer debt and limited savings, why doesn't DH focus on getting your family onto more solid ground first? (You always put your own life jacket on before helping others).

Money doesn't always bring happiness but jeepers being under financial strain is utterly draining and miserable and brings endless worry, strain and sleepless nights.

I absolutely would not do this unless I was a multi millionaire and could afford to lose the money.