Advice on lending money to a friend

noisla

In a nutshell – I would like to lend £1-3k to my boyfriend. I have every confidence that he would use the money as intended, could afford to repay me, and would repay me even if we split up. However, he’s very practical and independent and wouldn’t want ‘charity’ from me. I am also pretty financially sensible and realistic – these things can go wrong no matter how good a character you think a friend/partner is at the time. I therefore wanted advice on how I could set this up i.e. with a loan agreement requiring repayment, and also how I could present this to him without appearing patronising.

As background – we've only been going out a few months, we're both in our 30s, the money would be used for him to finish works on his flat (a right to buy council flat, which looks like a building site inside, debris everywhere, holes in plaster, no kitchen, etc). He can plug away at fixtures and fittings, painting and decorating (he's very practical), but he needs to do (afford) a few big jobs first (e.g. new boiler). It's really getting him down – the state of the place and the fact he's tied down, he'd like to change job but can't move as the flat's condition is unsuitable for sale or renting out.

He saves a little money every month but it will take him several years at the rate he's going. His family don't have much money and he has little/no savings, although he’s intensely hard-working and generous to me. In fact he’s so helpful and capable, he’s done loads for me (DIY, fixing my bike, nursing me through an injury and minor surgery, driving me to job interviews). I earn a fair bit more than him and also live more cheaply, in a rented houseshare. For various reasons I’m not looking to buy a flat for a few years and my saved up deposit money is doing nothing. I am not blinded by the new relationship – I would get satisfaction from helping out any friend financially, and I am prepared (mentally and financially) for not getting the money back. For the avoidance of doubt, I would want no claim on his flat, once done – just a simple loan. We would discuss the interest rate and I am aware of income/withholding tax implications thereon, so don't need advice on that.

Thanks in advance

Carlm90

noisla wrote: »

He saves a little money every month but it will take him several years at the rate he's going. His family don't have much money and he has little/no savings

Sorry after reading that part I would strongly suggest against lending money. I understand the reasons you want to lend money and he's probably a really great guy but there are so many horror stories and it doesn't look like he's in a great position to be taking money. It will put strain on your relationship and it could possibly push you apart.

I'll leave my point there.

On the other hand, I'm not sure what you can do to make a legal agreement for him to pay you back. I'm sure that many people would take that the wrong way. I know I would probably be a little offended if I wanted money from my girlfriend.

Dellers

As you said you have only been going out a few months, Honestly I would not offer him the money. Max I would offer is £500 to go to b and q to get things with him like paster etc.

Outpost

Lending money to friends and family: damned if you do, damned if you don't.

Tixy

You sound pretty switched on. You accept that this could be money down the drain. So leaving out the usual warnings and in answer to your questions

I think if you google for a loan agreement you should find some examples. But key things are the details of your both, the principal amount loaned, the agreed APR etc. Both sign it and have someone witness it. You might also want to scan the signed copy into the computer and email it to both your email addresses (that can help prove the date it was agreed etc).

As to how to approach him to suggest lending the money - I guess you could point out how little you earn on your savings at the moment and offer him a rate that would mean you were earning more and that was still a cheaper rate than he could borrow commercially. If he's really not keen don't push it - or just say the offer is open if he changes his mind. And I suggest keeping the loan amount as low as is practical for him to complete the work.
And as for suggesting an agreement - I'd just say offer him the money on the understanding that there will be a written agreement in place - just say its for everyone's benefit or say a friend of yours lost some money that way or something. If you don't get a signed agreement at the beginning then you won't get one agreed at a later date.

LovelyLeeds

I've done it and lived to regret it. Believe me you will be the last person he pays after all his other outgoings. It will change the dynamics of your relationship in a way you cannot begin to anticipate unless you've been there.
Don't do it.

somethingcorporate

If he cannot afford to save how can he afford to pay you back?

andy.m_2

This is all very good preperation for lending money.

But if/when he defaults and the courts side with you (after you have paid the fees) there still wont be any money to reclaim each month.

I would try to tie it collaterally to him so you retain some sort of charge over the property

LovelyLeeds

Here's a scenario for you, and believe me there are loads more.

So you''ve lent him the money, and he's paying you back dilligently, or he's not paying you back diligently - it really doesn't matter for the purpose of this scenario.... you go out for dinner - he pays and is left thinking, if I hadn't paid for dinner I could have paid her the £40 I owe (or whatever the agreed amount is).
Or maybe it'll be the other way round in that YOU pay for dinner because you feel sorry for him because you know he also has to pay you £40 at the end of the week.
So whichever way you look at that scenario, you are both in a no win situation with each other. You may not feel that will happen, but believe me IT WILL and then some.

Please don't do it!

RichGold

Its certainly a tough one. I Have personally been in this situation as the person asked to lend. There are many warnings in your own post, It sounds to me as though you are yourself wary of lending this money.

Only you know whether you can afford to lose this money, as that is the likely outcome. If you'd been together 10 years and had some idea of how he handles money I'd say on your own head be it, but you felt you needed to ask on here which means you must have doubts.

I say don't do it.

*doodle*_2

I personally wouldn't do it. Lending money to friends is usually a recipe for disaster and as for lending a lot of money to a fella you have only been seeing for a few months?? You need to ask yourself if you can manage if you never see that money again.