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?

Family and friend loans are a nightmare. Voice of experience. £5k I never expect to see again...

Stand your ground.

Has he never seen an episode of "Grand Designs"?

Building projects generally seem to go over budget and take far longer than expected, ime. And the bigger or more innovative the project is, the worse it seems to get.

It would be divorce for me.

It seems you, as a couple, lack financial security to begin with (why do you have debts and no savings when you’re both high earners? We’ve always been lower income so maybe I just don’t get it, but I’ve always prioritised financial security as far as we’re able to achieve it; I just can’t imagine having a high income and not ensuring we were financially secure). This alone would drive me a bit mad anyway - I couldn’t stand being worried about money so needlessly when better decision making would surely lead to less worry!

But then this whole loan thing would be an absolute hard no. It’s insane. There is no way I would be willing to be dragged into that and you absolutely will be, even if it’s just in your husband’s name, because if he can’t contribute as much towards bills, mortgage etc because of this loan then it very much becomes your problem.

If he doesn’t respect you enough to listen to your view on this then you need to protect yourself and get out.

All the other creditors will get paid first (including legal fees and expenses if they've taken action to pursue unpaid debt) and your DH will only get what's left, if anything. Absolute madness. His friend is suffering from an acute case of sunken costs, and your DH needs to understand that his qualities as a friend do not depend on ruining his finances as an act of brotherly manliness.

I couldn't trust someone I was in a partnership with who did this against my wishes.

The same thing happened to an acquaintance of mine, she lost over £100K,never saw a penny of it.

I absolutely would not be allowing this. However. If your DH proceeds, he needs to go down the legal route as an investor in this project, and have all of the T&Cs of the investment set in stone by a lawyer. None of this “back of a fag packet” agreement.

No way is this a good idea. This has disaster written all over it.

But to be honest, it sounds like the lot of you are absolutely terrible with money. That none of you actually have any, yet commit yourself to financially draining projects, and borrow money off of each other too much. Why are you all spending money you don't have? It honestly doesn't sound like you and your husband are in a position to loan anyone any money. Would you even get approved for a loan if you're already in debt?

In the current housing market and if the project has been on-going for a while I very much doubt there will be much in the way of profit. At the very least they need to get a qualified surveyor’s valuation (or three) to see what the sale might realise?
I’d walk away anyway, in your shoes, but at least you’d have ammunition with the surveyors’ valuations.

He earns high enough to get a loan for a substantial amount of money but has no savings and has debt.? The man is clearly financially irresponsible and should in no way shape or form take out this loan. YANBU to be strongly opposed to this.

Never lend what you can't afford to lose.

There's properties come up here sometimes. The photos on Rightmove show half finished rooms cans of paint etc abandoned. The houses go for a song to a developer usually.

I wouldn't lend my brother that kind of money - certainly not someone 'who is like a brother'. You and your husband already have loans - you are lending to someone who has other creditors. If it all goes tits up then you won't be first on the list for repayment. It's a ridiculous idea.

You need to find a calm space to talk to him about it. Get out of the house just the two of you and discuss it calmly.

Another voice going ‘this is madness’. High paying jobs are not that easy to come by at the moment. If one of you lose your job, you’re absolutely fucked. In some senses he wasn’t wrong that you need to crack down and build up savings. To then go back on that and take out a loan for a friend who has exhausted all their other options is just a terrible idea on so many fronts.

What if the building doesn't sell high enough to cover his costs? Who will take the loss? Him or you? Do you trust that he knows what he's doing and not spending money on things that won't add value?

I wouldn't. I would lend him a couple of K, however much he's lent in the past. But not tens of thousands.

His friend’s business is about to collapse. He needs to sell the site at a loss, allowing someone else finish and sell.
A investor would cover the shortfall if it was profitable.

This is madness. if your husband feels duty bound to loan him money, could he not just offer him what he could afford. Personally I don’t think this is a great idea either, but if your DH feels obliged to reciprocate his friend’s financial assistance from the past, then actually this is most fair. Whatever happens, he needs a formal agreement in place, and if there are costs associated with drawing that up, it needs to be added to the loan.

One the project is finished, is it likely to sell immediately? The market is pretty flat at the moment. Also if it does sell, do you just get the money back, or any profit? It doesn’t sound like he’s thought anything through at all, for some weird sense of obligation to a friend. I would find it very difficult to forgive my husband for entertaining some hairbrained idea like this (although on a different note, I always wondered where people on grand designs find friends with so much money to help them out at the end of a project, and I guess I know the answer now!)

If your husband takes out this loan while you're married, if you subsequently get a divorce the loan will be counted as marital debt. Ie you will be considered jointly responsible for it and it will be taken off the marital assets before any sharing out is done. It won't matter if you knew about it, or agreed to it, as my sister discovered when her ex-husband turned out to have a loan and several maxed out credit cards that she had no idea about. I would suggest getting legal advice.

My husband and I have always agreed to ask each other if we want to loan outsiders money, over £20. I’d be angry with him too. I certainly wouldn’t be frugal anymore and I’d tell him that, and start spending more. I hope he doesn’t go through with it.

That's a bit of a leap!

I think it far more likely that OP's DH liked the idea of being his mate's saviour in difficult times, tbh; and that the friend has bigged up the profits likely to be made and made it all sound like a breeze once the money is there to finish the build.

It sounds like the friend's project is doomed financially. Your dh understandably finds the thought if his mate going bankrupt really really hard - it will be.

But even if your dh had the capital , I 'd guess it probably wouldn't save the project..Add the extra borrowing costs and that becomes more of a certainty.

If your dh really wants to help his friend he should support him to work out the least catastrophic way to minimise the losses so the friend can extricate himself and move on.

Not riding in like the white knight he actually isn't. And just throwing himself (and you) into the same money pit that's dragging down the friend.

This friend might need some where to sleep if this project doesn’t work out so you’re best to keep a roof over your own heads so you can offer him that.

My husband making this decision against my wishes would be marriage ending for me. It’s not a few quid.

Consider buying equity rather than granting a loan.
Though both may be ill-advised.

He’ll never get that money back. Have you raised this with his parents/family and also your own family. You need a family conference as he is putting your and your children’s (if you have any) financial security at risk. If he doesn’t listen I’d see a divorce solicitor.

This basically because once he has this debt and the friend can't pay it back it wil impact your life.