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?

Sorry but if the friend has already maxxed out all borrowing, I would not feel hopeful your DH will even definitely get his money back - plus everyone else will have to be paid off first.
He is going to have to tell his friend after further discussions it doesn't look like the bank will give him the money after all.. please don't let him do this!

Your husband is throwing good money away after bad. His friend does not sound like a particularly good business person. I think if there is still 12-18months of work outstanding it is unlikely the amount that your husband will be able to borrow will remotely be able to cover it. If this was a sound investment his friend would be able to source the money via proper investors etc. This project is never going to finish. Your dh might as well just set fire to the money.

This would be a massive massive issue for me if I was married to him. I would actually consider ending my marriage over this.

Some posters have suggested investing in the project rather than a loan. I’d be wary of doing that without carefully reviewing the way the project has been structured and every agreement with 3rd parties relating to it, as under some circumstances being a partner in the business could land someone in even more hot water if the whole thing goes tits-up further down the line and creditors start circling.

Sorry to raise this, but as your DH is making such an irrational decision here in the face of your family finances, and is doubling down, is there a chance his friend is holding something over him to put pressure on? A past indiscretion or knowledge of something he doesn’t want you to know about

His friend is a financial liability.

For someone who earns a high salary, your DH really isn’t canny.

“No sorry, my wife will divorce me.”

Who on earth cares if his friend knows it’s your decision.

Hmm, I wonder. It's not as easy as all to get such a large loan that however good your credit is. I'm guessing he would have to lie about why he wanted it.

DH has a friend exactly like this and in spite of friend's perception that it's always been 6 of one and half a dozen of the other, since I've known DH it's all been one way. However, it's only ever been a few hundred quid from time to time, and we know we will never get it back.

£50k I would be absolutely furious and do everything in my power to stop it.

Also you may both have high paying jobs now but what is the jobs market like for you both? Is there any whiff of redundancies as often the high earners are out first! DH is a medium earner and a little worried about his job over the next few years so we have just cleared the mortgage and are funnelling as much money as possible into our savings!
The financial security of your own family should come way ahead of any extreme loans to friends and it sounds as though your financial security is nowhere near strong enough even without the loan, your focus needs to be on shoring up your own finances!!

This is what I keep coming back to. And if DH is getting a personal unsecured loan what’s he going to tell the loan company when they ask what it’s for ? He’ll have to lie because they’re not going to lend him £50k to give to someone who high street lenders consider too high risk for credit. So not only a loan which has been obtained fraudulently, but with absolutely nothing tangible to say any money has ever changed hands. Bonkers.

I would be completely against this and if he insists on going ahead with it I would make sure that I'm protected from any losses.

Nope. Personal unsecured loan in DH’s sole name. Nothing to do with OP. And since the loan money hasn’t been spent on anything to do with the family, in any divorce proceedings a court would be likely to rule that he pay the loan out of his own share of the assets.

Of course this is how investing works, but in this case the risk appears to far outweigh the potential rewards - otherwise the commercial lenders would be queuing up to lend money to the guy. At the same time, the OP's husband is not investing a bit of spare cash - he's proposing taking out a five-figure loan when the family is already financially stretched. Repayments on a £40k loan are going to be in the region of £800 a month, if not more, and the total cost of borrowing the £40k over 2 years is going to be another £8k - £10k. (The hypothetical £40k is just continuing the previous illustration - the sum might be less, or it might be considerably more).

Even upping his % is of no use if the project itself is not viable and the "friend" can or will accept whatever terms the DH dictates if he is desperate. Either the friend is facing the contractors walking off site if their invoices have not been paid, or he is betting that he can complete and sell and save his own skin. Either way, he's pushing a big chunk of the financial risk on to the OP's husband. If the project, completed or otherwise, sells at a loss or at very little profit, the OP's husband can kiss his £40k-£50k goodbye. Being owed "£40k at 10% interest" is worthless if the prouject has collapsed or the friend has been bankrupted.

A quick google says that £25-35k is the maximum any high street bank would be prepared to offer as an unsecured loan, and OP says what’s needed runs into the tens of thousands. If I were OP I would be very, very wary of DH trying to obtain a mortgage secured on the marital home without her knowledge. She needs to register with the land registry website so that they will alert her to any financial searches from lenders.

I would still get proper legal advise! As another poster put their friend was liable for the debts of her husband when they split and my DH said when he and his ex split as part of the financial settlement the details of any loans and credit cards were needed.

That's quite right, but they will force the sale of the family home and account to Op for her half. The monies from the husbands half would be taken to pay creditors.

This is such a bad idea, Ops husband would be risking personal insolvency if he could not continue making payments.

As pp said, the friend sounds as though he's in over his head. The best thing a friend can do is to be there to pick.up the pieces after it's all gone to pot . . .

Get a HR1 form via gov.uk sorted quickly

This bloke is going bankrupt no matter what, don't let him take you down too.

You are married. Even if the loan is not in your name, and he defaults, they can take anything considered a joint possession. I speak from experience. Do not let this happen.

No she isn’t.

OMG I wouldn't even borrow £100 to lend to a friend let alone 10s of 1000s of pounds. There's a reason why this friend can’t get this money himself ...

@Sefal I would be threatening divorce if he did this, and would act on it if he disrespected my views, when I said no fucking way!

.

The only other protection I can think of to put in place is that your DH does the loan to his friend via a solcitor and has a charge against the friends house so that he CAN get it back. That charge would be lifted when repaid. If the friend is not willing to do that, then it can be inferred that he KNOWS that there is a risk he cannot.

Honestly - if he has maxed out all other avenues this is a huge financial red flag as to his ability to repay it. And, like everyone else here, I would say that if he proceeds against your wishes, it is a marriage terminating factor.

Is your husband likely to be able to get such a large loan without providing security- your house for example?

Even if he manages to get a personal loan, non repayment could end up with a charge on your property. Your husband might think he’s being a great guy but in fact he’s being extremely selfish.

This 👆

Gosh I had no idea. I thought as they were married they would both be liable.

Though if you stay married OP and it the friend defaults it will still impact your finances.

Some people are just stupid when it comes to money - your husband is one of those, and tbf even though you are objecting to this loan and rightly so, you are probably not very money savvy either. If you are both high earners, yet have debts and no savings, you're not manaing money very well Agreeing to the loan is just another example of your husbands complete lack of financial knowledge or awareness. Even though the personal loan will be in his name, does he really not understand how this will affect you both? Can he afford loan repayments on top of his outgoings already? It doesn't sound like it, if you already have debts and nothing saved despite your high incomes. If he can#t make those payments and defaults, you might not be liable but you will have to pick up the financial pieces, when he can't get a loan or mortgagere-mortgage, or when you have to pay a bigger share of the bills because his money is going on servicing a loan. It would be a deal breaker for me that he was prepared to screw the family over, just to placate a friend.