A friend in debt - how to handle?

princessdon

My nephew who has lived with my parents for most of his life has a friend I have known since knee high and hasn't had the best start in life.

He told me recently he is in debt with pay day loans and others. It's new and so is manageable ish at this stage. He never asked for money from me just advice on how to create a budget as he knows I have set my nephew a budget and helped him save etc.

After discussing with my hubby we agreed to loan (but long term gift) him the pay day loans. Ie I pay them in full, expect payment via monthly payments and once he has proven he's keeping debt in check give him the money he repaid as a start to his savings.

When I looked on the debt forum for advice - ie how to pay, I have seen time and time again that bailing people out doesn't teach them budgeting.

If anyone has helped friends or family in this way and has suggestions on how to handle this before I speak to the lad I'd be grateful as this is new territory for me.

sassyblue

It's nice of you but l think I'd pay off those loans for him but possibly not give him what he's repaid as a gift? Take him for a nice meal or treat him to a gift experience once its repaid?

It does depend on the personality though, l have 3 nephews l know would repay me as soon as they could and one l wouldn't trust to do so, therefore I'd be more inclined to treat the 3 nephews but the 4th is terrible with money anyway so l know repaying him as a gift would teach him nothing. Hope that makes sense!

princessdon

Thank you I don't really know him as well are I'd know my nephew - I'm expecting him to say no if honest, but he's looking at paying back more interest than I can bear if he doesn't nip in the bud.

Re paying him, I've always said money to relatives or friends should be treat as ae gift and I want him to start to save, so was going to offer him the money back once he'd saved the matching value as an incentive.

He has done plenty for me and my parents over the years for no payment including tiling and plastering so id like to give back this way.

michelle2008

While it is a very generous offer, I do think he should learn how to manage this himself. Certainly teach him how to budget and keep an eye and make sure he isn't getting depressed about his finances - but stand back and let him learn to stand on his own two feet.

nearlyrich

I helped a friend sort out a big debt problem, I had lent her money in the past and she had repaid me but she was in denial that her decent salary couldn't stretch to everything and the interest was taking a chunk. I lent her some money to do a full and final and she cleared the loans and cards and to her credit she has been debt free since. I don't think just giving someone money is a good idea but you can guide him to DFW board and help him sort out a payment plan and budget.

princessdon

Ok I'll get him to look at the boards, but think his reason for debt has been resolved (girlfriend who used him and dumped him when gravy train ended). I just know I owe him financially as he never takes payment for things (sees it something he should do to thank us for after club pick ups, brekkie in bed, BBQ's etc). Example he plastered my parents hall a while back and would only take £60 for the materials yet it took him a few days to do.

But I would much rather he had his lightbulb moment long term and if bailing means delaying this moment I am torn.

Mojisola

princessdon wrote: »

After discussing with my hubby we agreed to loan (but long term gift) him the pay day loans. Ie I pay them in full, expect payment via monthly payments and once he has proven he's keeping debt in check give him the money he repaid as a start to his savings.

When I looked on the debt forum for advice - ie how to pay, I have seen time and time again that bailing people out doesn't teach them budgeting.

Just paying off loans doesn't help people.

Transferring the loan from the sharks to you and giving him help with budgeting is a different thing. If you are sure he is willing to turn the corner and you can afford to lose the money if he doesn't live up to his promises, I would take a chance on him.

Catching a problem early can make a huge difference to someone's life and you're in a position to help.

princessdon

Mojisola wrote: »

Just paying off loans doesn't help people.

Transferring the loan from the sharks to you and giving him help with budgeting is a different thing. If you are sure he is willing to turn the corner and you can afford to lose the money if he doesn't live up to his promises, I would take a chance on him.

Catching a problem early can make a huge difference to someone's life and you're in a position to help.

Thank you - was my thoughts, if the lightbulb moment doesn't arrive at least I've tried. Hence asking on familes boards not debt free as I wanted reassurance I wasn't hurting long term.

quinechinoise

princessdon wrote: »

think his reason for debt has been resolved (girlfriend who used him and dumped him when gravy train ended).

I think his problems have/had more to do with relationships than money. Do you think he's likely to fall into similar patterns in the future? As the equivalent of an auntie, perhaps you (or your husband) could discuss that with him. He seems to be comfortable talking about his problems with you, so warning him to steer clear of users will do more than waiting for him to slowly pay off a large financial debt.

If you can afford to gift/lose the money, then gift it. He is obviously a close family member, regardless of mere blood, and he sounds like a good lad. Tbh, I think you may have difficulty compelling him to accept your gift!

getmore4less

Do the budget first idealy getting them to take the lead perhaps helping them once they have looked at debtfreewanabe.

They need a SOA and a 12month plan and the debt free plan

Also look at the last 12 month to help them identify why they went wrong.

once they have a workable plan and looks like they are sticking to it making sacrifices you can then make the offer knowing what a realistic payment will be still kepping a tight budget but shortening the first part of the plan getting back on track.


Edit : ok read the full thread slight modification.

Help create the workable plan that they seem happy with, then make the offer of a loan to cut the interest being paid.

Agree with the comment to approach the GF issue that caused the problem probably by asking about it and to see if they can spot the signs next time.

fluffnutter

Hmm, it's a lovely gesture but... once he's paid off the loan to you (or even before) what's to stop him getting more payday loans any time he finds himself a bit short of cash?

After all, it's no big deal is it? If payments get a bit awkward, you'll bail him out won't you? That's what you did before. That's why it doesn't teach budgeting - the problem's not being dealt with, only the symptom. All you're teaching him is that others will step in and sort out his financial messes, rather than how not to create the mess in the first place.