Lending to family/spouse - what should I know beforehand?

WalletFullOfMoths

I couldn't find a similar post, only tales of woe after the event, so hope I'm not doubling up on posts.

I'm considering loaning my fiance a sum of money but want to know what I would need to put in place and what to consider before going ahead (if that's what I decide to do). For example, can I get a legally binding agreement set up? What are my options if he defaults? Are there any tax implications that I need to consider? Has anyone ever done it successfully or does it always end in tears?

Some background on why I'm considering such a bonkers idea:
We need a new car (he gets a car allowance from his employer). He's applied for a supposedly low rate loan but was told that the interest rate would be double the advertised representative rate, and of course he now has the application recorded on his credit history so is reluctant to try anywhere else. (I see Martin Lewis kicked off an entire parliamentary investigation into this ridiculous practise).
Anyway, I'm so unimpressed with the banks that I'm considering lending him the money. It's spare cash which is currently off-setting my mortgage (I rent my property; we are living in rented accommodation), so we would agree a rate that is beneficial to me but still lower than the bank loan. And best of all, the banks wouldn't get a bean.

However, I fear it could get unnecessarily complicated and both he and I are very wary of the idea, but are disgusted by the lack of transparency in the banks' lending process.

Any practical advice?

Sambucus_Nigra

WalletFullOfMoths wrote: »

I couldn't find a similar post, only tales of woe after the event, so hope I'm not doubling up on posts.



Any practical advice?

Erm, I think there's a reason that there are so many tales of woe.

opinions4u

Read this:

https://forums.moneysavingexpert.com/discussion/76953

Then don't lend the money.

somethingcorporate

Your venom towards the banks in this situation is misguided. You have no "right" to see their internal workings nor to their money.

Read O4Us linked thread and then don't do it.

kerrirobberts

I lent my sister £2.5k back in April last year with her telling me she'd pay me back £100 a month. It's been going down and down ever since so she now pays me £50 a month, and I have to keep on at her to get even that.

OH says I should just write it off and I wish I hadn't lent it in the first place. Don't do it.

McKneff

Buy a car, in your name, register it to you.

Then hire it to him on a weekly'monthly basis.

The car will always be yours

rising_from_the_ashes

Don't do it - I know so many people who've lent to family / friends and it's ruined relationships - why put that kind of stress on yours.....

McKneff has a brilliant solution - your fiance could use the money he gets from work to pay for the use/upkeep of the car but it will ultimately be your asset.

WalletFullOfMoths

Thanks for the feedback and sorry to hear some of you have fallen short of pocket from lending money.

Anecdotal evidence is plentiful and I'm very aware of the risks, hence my post. It's facts that I'm after and practical ways (if they exist) to reduce the risks.

SomethingCorporate - I don't expect a 'right' to borrow money. I've worked with Experian and corporate finance departments so I understand how it works and why they don't want consumers to know how it works. What I dislike is that banks penalise you for checking competitive rates by leaving a footprint on your credit history; it is totally unnecessary.

Thanks for the suggestion McKneff. I'll give this some thought.

RedFraggle

You also asked about tax implications. I'm no expert, but I would assume that any interest paid as part of any repayment would be classed as taxable income the same as interest on savings is. If you did go ahead you would need to factor this in to what was an acceptable rate.
You also said it's your fiance, when are you planning to marry? Once you are married who is entitled to what out of joint assets will change completely. I'm not trying to be nasty here, but if you are planning on spending the rest of your lives together, should you really need to worry about him defaulting on payments on a loan for a car.
My final tuppence worth is that I wouldn't lend money to friends or family unless I was prepared not to get it back. The upshot of that is the only family loan is to help one of the kids through university on the basis that it was an investment in their future. I'm not holding my breath.

WalletFullOfMoths

Thanks, more useful advice. I'm with you on the 'don't lend unless prepared to not get it back'. I guess I just wanted to explore the options, but it's now clear it's a bonkers idea from a financial point of view too. Glad I've got that sorted!

Hope you don't have to hold your breath too long

ManicMum

Seems a bit clinical this. This is just my opinion but you need to trust your other half. Get a joint account then it's not an issue anymore.