Loaning money to family members

[deedeecee]

A little background:
My DH and I are financially responsible people. It hasn't always been this way, especially for me. We paid for wedding, but started our marriage with debt, again, mostly from me.
The early years were a bit of a monetary struggle and stressful (my husband is pretty debt-adverse). We managed to claw our way out of debt and finally buy a cozy (read: small) starter home.
Now, 14 years later, we are in a better financial position. We recently sold our first home and bought a larger one. We are not wealthy by any means, but we budget and maintain a savings account, which we are trying to beef up in anticipation of buying a new roof next year.
We could probably be better with our budget and save a bit more, but we do OK.
Our current situation: We currently have two loans out to family members (one on DH's side, one on my side). This is not the first time we have loaned money to these particular family members.
I feel like we save and budget so we have money, which we then loan out to others who don't save and budget.
It is more stressful to my DH, but it is a bit stressful to me, also. I think my stress is ultimately due to it being about money. I have money, they don't have money. Aren't family members more important than money?
I know you shouldn't loan money out that you can't afford to lose, and if we never got paid back, we would be OK but it would certainly cause a rift in the family. These family members have paid back previous loans, but when they are late with their loan payments, we have to ask. We hate that feeling.
Do you loan money to relatives? And if you don't, how did you handle refusing loan requests? Did it damage relationships?

 

[Allison]

No
And have simply said no, we are not able to do that. End of discussion

 

[ironpig70]

Learned along time ago you don't loan family money.

You give it to them and if they return the favor its all good.


Personally I will not loan money to family and unless its dire situation they shall not live with me.

 

[Fortuosity]

Whenever I choose to loan money or anything else to anyone, I don't expect to get it back. I certainly appreciate it when someone does, though, and I am much more inclined to loan money/something to that person in the future as a result. If not being paid back/getting item(s) returned would be a problem for me in any way, I don't lend. If I refuse a request and the person is unhappy with me because of it...oh-well.

 

[disneydee6]

Loaning money to family is a very sticky issue. The one staple of loaning money to a friend or family is to understand that you may not get it back. There are some people that don't understand that you will want it back in a certain amount of time, and put you in the uncomfortable position of asking for it back. I understand the desire to want to help out family, but you shouldn't be out out helping someone else.
Wishing you luck!

 

[Art 1]

If a family member needed some money for something important and I had the money I would give it to them. If they found a way to pay me back, ok. If not, ok. That's one of the things extra money is for, to use and help people. Not to hoard.

 

[bigbabyblues]

No, we don't. My mother (most financially irresponsible person I know) has asked me once and I told her no, and I told her why. She has never, ever attempted to repay anyone that loaned her money or paid a bill for her to keep her utilities from being shut off (namely, her father, who raised me as his own child).

 

[deedeecee]

I do think the loans need to stop, but that's easy to say when someone is not currently asking you for money.
Thanks for the additional perspectives.
Art 1, what if someone truly needed the money but they need the money because they spent foolishly when they had money previously?
And where do you draw the line between "hoarding" money and saving for unforeseen expenses?
Thank you!

 

[tink20]

Usually if a family member calls to borrow money its under $100, most of the time we don't get paid back (its usually my husband's brother and sister) As a matter of fact, his sister just called today to "borrow" $40. The only thing that bugs my DH is she only calls when she wants something, she doesn't know that we know, but she just borrowed money from his mom last week.

When my sister was going through her divorce, I gave her some money. She didn't ask, but she did need it.

My other sister borrowed $800 once, but she repaid me in about 2 months.

I don't mind helping out, as long as they need it. It just bugs me that they still have money to go out and drink and smoke, but can't pay us back.

DH's sister isn't married and doesn't have any kids, and his brother's kids are grown. His brother hasn't ask for money in a long time. We have a family that we are trying to support. So I feel like we have more expenses than they do and they need to learn to manage their money better. We have NEVER ask to borrow money from them. DH did get mad at his brother once, it was one time his brother called to brag that he had won $7000 at the casino, yet we still didn't get our money back (which probably added up to about $500 at the time)

Sometimes if it gets to be too much of an occurrence, DH will tell them that we don't have it.

 

[lovemygoofy]

I do think the loans need to stop, but that's easy to say when someone is not currently asking you for money.
Thanks for the additional perspectives.
Art 1, what if someone truly needed the money but they need the money because they spent foolishly when they had money previously?
And where do you draw the line between "hoarding" money and saving for unforeseen expenses?
Thank you!

My husband and I are considered the "rich" couple among my family. We save and drive nice cars and have good jobs. We are also work our behinds off for it. We pretty much support both moms because they are on limited income.

We came to an agreement when we married that we do not loan money out at all other than the money we give to the moms. There is a difference in living paycheck to paycheck and not saving because the money is being wasted. I'm not going to spend my hours nor my husband's hours of working 16 hour days to give it away to people that don't want to work or make the hard decisions about money.

For me to be "hoarding" money I better have several million in the bank. If you are having conversation about repayment and your husband is stressing about the loaned out money then frankly you need to quit doing it. When it strains your family to support another because of bad judgment on their part, that isn't fair to your house.

 

[Colleen27]

I will, but only to specific family members under specific circumstances, partly because we know they'll pay us back and partly because they are generally responsible with money but have difficult curcumstances that sometimes mean they come up short. Everyone else gets a firm "no". Fortunately we don't have anyone in the family who would push the issue or resent us declining their request - if we say no, I think people generally assume that we just don't have it available to tie up for however long it will be before repayment, because as a single income family with two kids in private school it is an easy assumption to make.

 

[ironpig70]

If a family member needed some money for something important and I had the money I would give it to them. If they found a way to pay me back, ok. If not, ok. That's one of the things extra money is for, to use and help people. Not to hoard.

Not to be nit picky but money is to be hoarded by those who have it so when the day comes that they need it they have it. Things like an accident, job lose or they simply want to take a vacation or god forbid retire.


Sorry but I shall hoard my money as it is mine.

 

[Colleen27]

If a family member needed some money for something important and I had the money I would give it to them. If they found a way to pay me back, ok. If not, ok. That's one of the things extra money is for, to use and help people. Not to hoard.

There is a fine line between helping and enabling, though. I'm happy to help family that has encountered a temporary bind, and I find I give away money far more easily than I lend it. But I won't bail out relatives who make a habit of financial irresponsibility. For example, we have a particular relative who called with a sob story about an electrical shut-off notice... but this same person has an expensive hobby that he travels one weekend a month to indulge. So he's enjoying something we couldn't afford, and then coming to us for help with his basic needs? That's a no. But if his son wanted to play a sport and he couldn't afford the signup fee or was going to miss a school trip for lack of money, we'd be happy to help with that.

 

[Christine]

In general, I do not lend money. I will lend to a family member who is responsible but had something catastrophic happen to them. Even the best savers often can't handle that.

However, I will not lend to those who are habitually living on the financial edge. All you do is enable the bad behavior.

 

[kathie859]

Hoarding=Saving=a BAD thing????

I sincerely disagree.

If I loan money to anyone--friend or family--I expect to get it back; however, I don't bank on it. If I have no expectations of repayment, it's called a "gift".

 

[indygirl99]

I do think the loans need to stop, but that's easy to say when someone is not currently asking you for money.
Thanks for the additional perspectives.
Art 1, what if someone truly needed the money but they need the money because they spent foolishly when they had money previously?
And where do you draw the line between "hoarding" money and saving for unforeseen expenses?
Thank you!

We don't lend out money. We have bought a pair of shoes or a coat or a car seat for children that needed it. But we don't constantly buy things for family either.

We also gift those that ask for a "loan" with a book on budgeting. We have our favorite but there are more than a few on the market to chose from. Some have appreciated it and put the book to good use and a couple have just rolled there eyes and gone off to the next person to ask for money.

 

[AuroraSheasMom]

It's a difficult situation. Generally, if the loan is for a small amount, I'll usually just make it a gift. For example, my sister in law needed money to pay daycare when she was going through a divorce. We simply gave it to her and I also watched our nephew for a couple of weeks to help her out. This was several years ago when we had our mortgage paid off, paid for vehicles and one child.

Fast forward 10 years later, and now we are the ones who need some help. Due to some unforeseen circumstances, we now have a mortgage that we swore we wouldn't ever have again (but after a house fire that destroys your home you do what you have to), 2 children, and my going back to college and living on one income for 4 years, we are struggling financially, in the short term. My MIL graciously offered to loan us some money to help out until my paychecks start coming in, so we don't get further behind. However, we are all in agreement on the terms-which is something that I think causes issues when loans to family members are paid.

In our case, we insisted that we will pay $xxx each month on the 1st Friday of the month. However, any extra $ (storm checks, my paycheck, income tax returns) will go toward paying her back. On her end, she wanted to see that we weren't just "blowing" money and taking advantage of her kindness. We went over out budget with her, and now she actually understands that while DH makes $xxx per week but because of insurance, taxes and a 401k loan (again, thanks to house fire), we bring in far less weekly than she thought. She also knows that I am actively lookinh for more work (just signed up to substitute teach in additional counties than the one I am currently working for) and DH is looking for some part time work on the weekends. She knows this isn't a situation where we are not being financially responsible and looking for a constant bail out. In fact, we cancelled a graduation trip this er because financially we didnt feel comfortable spending the money (to WDW originally, then NOLA) since I didn't have a job lined up.

I think you have to make a decision based on what your guy feelings are. I you feel taken advantage of, or like you are th family bank, just politely decline to loan the money. Or rudely, if they try to push the issue. You are certainly not obligated to loan out your hard earned money, especially if you don't feel like your generosity is appreciated. If you do choose to give out a family loan, make the repayment terms clear and realistic. $50 a month out of the first week's paycheck for 12 months; and if they should get an income tax refund or major overtime, they should make paying you back a priority. Even though it may not be legally admissible, draft a loan contract that is signed and dated by all parties, for your own protection.

As for beating a money hoarder, I couldn't tell you at what point you become one. Perhaps when you have enough money in savings to cover a year's worth of income and bills. However, I think it's more a
State of mind than a dollar amount. If you have $10,000 in savings,
Mom's car breaks down, and you refuse to loan her $250 to get the brakes fixed, you might be a hoarder.

 

[sbtrfly74]

I do not lend money period... my parents are well off not rich by any means but I had to move in with them during a divorce at 27 and now my sister is having to lean on them at 43.

Due to my parents being always very money conscience their relatives always ask them for money. My uncle went into foreclosure and my parents lent them money fully expecting him to pay them back, my aunt lent the same uncle money (probably to pay my parents back) and is afraid to ask for it back. My father is a business oriented person and will not let money borrowed just go and so be it.

Ive always been a big spender and illogical spender until recent but could also budget an $800 month income and an $7000 income to fit our means. With that when I went back to school, I would pay for lunches and dinners on occasion which left me wide open to friends asking me for not only money but to move into my house. No problem saying no... I have 5 ppl living in my house and its crowded enough and have enough money for my family. Tell you baby's daddy (hate that term) to get a job!

 

[Jaya]

A lot depends on what the person wants the money for. A relative needs dental work, yes I'll lend money. A child has a chance to go on a great field trip and the parents can't afford it...yep. A relative needs money to pay the mortgage and he's already several months behind, nope.....he's probably going to lose the house anyway and anything I give him will be good money thrown after bad. Also, I only lend what I can afford to lose.....my chances of getting paid back are very low. I do agree that the most annoying thing is to see the people who just can't seem to pay you back, still going out and partying and buying things they don't need. That just shows you where you rank in the importance of things.

 

[tvguy]

Kind of a tradition in my family.
Older generation lends money to the younger generation.
Younger generation pays it back on time.
Just smart money management. Interest rate set halfway between current deposit and loan rates. Older generation earns more money by getting higher interest than the bank pays. Younger generation saves money by paying a lower rate than the bank charges. Cutting out the middleman.