MONEY MORAL DILEMMA. Should Tina lend to close mate Stina?

Former_MSE_Wendy Former MSE Posts: 929
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Here's this week's hypothetical situation for you to cogitate on:
Should Tina lend to close mate Stina?

Stina has £3,000 on a credit card, it was at 18%, but the card company's hiked it to 29.9% due to the credit crunch. Having always been able to repay, now she's worried, and sadly her score isn't good enough to do a balance transfer. She tells close friend Tina, who had been complaining that her savings were now earning just 3%. Stina suggests Tina lend her the cash instead to clear the card and she'll pay her 6% interest, a win-win all round? However is lending to a friend ever that easy?
Click reply to have your say
Previous MMDs:
Should Rachel return the dress?
Should Janet pay for John?
Would you buy your neighbours' repossessed house?

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  • BlueAngelCV
    BlueAngelCV Forumite Posts: 671 Forumite
    No definitely not. You only need to read the threads on here to realise that lending money to friends and family is a bad idea.
    Plus, why does she have a bad credit rating? She's obviously not great with money.
    Even if she is totally reliable and not the sort of person to disappear (like some people I've read about on the forum) you never know what's going to happen. You might become unemployed & need the money. She might become unemployed & not be able to pay it.
    The only person I would lend that sort of money to (If I ever get into + figures!) would be a long term partner.
    Wedding 5th September 2015
  • ambyuk
    ambyuk Forumite Posts: 246 Forumite
    No, she shouldn't, what happens if she loses her job or something and can't make payments?

    On the other hand, I applied for a 0% balance transfer offer and was declined. No idea why, I don't have a huge amount of debt, my hubby makes good money, and we always pay well over the minimum payments on everything!
  • Dorrie
    Dorrie Forumite Posts: 66
    Part of the Furniture Combo Breaker
    Strangely enough I just read a similar dilemma in this month's Candis magazine - should you lend to a friend? Two people had - one friend signed a contract but then never paid anything and had to be taken to court, but still didn't pay and was eventually declared bankrupt. The other person repaid her friend as agreed a certain amount each month and they have remained firm friends.

    Personally I have lent money to a friend and she repaid me within weeks, but it was nowhere near the amount quoted here. I would be reluctant to lend thousands (even if I could afford it) and would suggest this friend seek professional advice from a Debt Advisor (oh, hold on, that's me!!). Seriously, I would encourage her to write to her credit card company to get the interest frozen, draw up a budget for her, etc.
  • ailuro2
    ailuro2 Forumite Posts: 7,535
    Part of the Furniture Combo Breaker
    no she shouldn't unless she can afford to lose 3K and a friend, she should offer to help her pal look at her budget to see where she's overspending and thereby up her payments on the card.

    For herself, she should check out MSE for the best ISA rate to get more for her money, or overpay her mortgage if she's on a fixed rate.

    Quickest way to lose friends is to lend them money....
    Member of the first Mortgage Free in 3 challenge, no.19
    Balance 19th April '07 = minus £27,640
    Balance 1st November '09 = mortgage paid off with £1903 left over. Title deeds are now ours.
  • spudz_2
    spudz_2 Forumite Posts: 17 Forumite
    Definetly not a good idea to lend large amounts of money to friends. It can potentially lead to problems with the friendship in the future if the person loses their job and can't keep up the payments. As someone else has already mentioned why has she got a bad credit rating? Obviously she's had trouble in the past keeping up payments.
  • forestlands
    forestlands Forumite Posts: 105
    Part of the Furniture 10 Posts Combo Breaker
    No, agree with all above! I lost 2K like that.
  • Money_saving_Martyn
    Money_saving_Martyn Forumite Posts: 220 Forumite

    You risk losing a friend. My nan always told me from an early age "A borrower nor a lender be" (though I do go for deficit banking and cashback credit cards - the money is just just there waiting to be paid back :money:) since it's the quickest way of stopping people talking to you, presumably because people avoid talking to you if they've not got your money!

    The only way I would consider it, is if a friend could "pawn" me something or somethings that will keep most of their value for the agreed period of the loan. If they don't pay, you sell it and write their debt off. At least the lender doesn't lose out and had made some effort to help.

    Even so, you risk arguments when you start selling their stuff on Ebay..... probably best to avoid.
    Please note: I am NOT Martin Lewis, just somebody else called Martyn that likes money saving!
  • docric
    docric Forumite Posts: 1 Newbie
    If Tina were to lend to Stina and accept interest with repayments, would she not be liable to income tax on the interest? On the other hand, should the friendship wither on the vine, could Tina apply to HMG for a rescue package? "Neither borrower nor lender be" is the adage, but I bet lots of parents are lending to their children, in which case, be generous and waive interest.
  • geri1965_2
    geri1965_2 Forumite Posts: 8,736 Forumite
    I wouldn't lend that amount of money, no.

    I've lent smaller amounts to a friend (£500 or so) who I've known for 20 years - he always pays it back when he says he will. He lent me £2,000 when I moved into my house, to pay for furniture and stuff, and only asked for £800 back. :cool:
  • kwmlondon
    kwmlondon Forumite Posts: 1,734 Forumite
    If my friend was unable to make the payments what I'd do is sit down with them, work out how much they could afford to service and gradually pay off and then lend them enough money to take their debt down to that amount. In the case of £3k it would probably mean lending them about £1,000. I would explain that I'd be losing interest on this and they'd be making money so we would split the difference and come to a mutually beneficial agreement, but I'd be happy to give them a payment holiday of a few months to get them on the road to paying back the credit card debt.

    My attitude is that I can afford to lose £1,000 in the grand scheme of things. I would be prepared to give that money to a friend in trouble so if something terrible happened and they could not pay back (lost their job, for example) then it would not mean financial problems for me. What I was taught as a kid is never to lend money you cannot afford to lose. This means I've never lost a friendship through money.
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