Thinking of Guarantoring/Loaning Friends or Family Money

michael1983l

Are you thinking of guarantoring or lending a friend or family member money to help them out? Before you do please listen to what I have to say first.

Let me set out by telling you I have borrowed money off my parents 3 times in the past, each time the loan getting bigger, each time being about stopping me from financial oblivion.

At the time, I was desperate for money and I was convinced that I could a) afford to pay it back and b) that it would help me in the long run.

Having convinced my parents to make this loan for me, it felt at the time that it was the best route to get my finances back on track.

However, this is what really happened. My parents being willing to loan me money that banks would not, actually stopped me from exploring the possibility of other avenues to deal with my debt problem and actually masked it. For years it stopped me taking real debt advice from a company like Stepchange and prolonged the pain of debt.

Do you think that being bailed out will help ease the burden of the person you are trying to help? Wrong, it has the opposite desired affect. It creates great anxiety and depression, knowing that you have debt to family members that you are struggling to service. Knowing that you can't go under a DMP, IVA or Bankruptcy because the family member will not get their said money back and will suffer because of your own financial mismanagemnt.

In my case, my debt problems could have been a thing of the past, but they are not because my parents unknowingly helped to prolong the causes of debt. They thought they were helping, I thought they were helping but it was the opposite.

I am now bankrupt and my parents still have 18 months of a loan left that they took out for me. I am not ignoring it but it is very difficult for me to sort the situation out. My parents are close to retirement and due to my actions have to delay their retirement until my loan is finished. Do you know how that makes a person like me feel, that you have had such a negative impact on somebody else's life. It doesn't make you feel very good to say the least.

Something I have to live with on my consciounce for the rest of my life.

So my advice to all those thinking about, guaranteeing or taking out a loan for somebody, in the best interests of that person, helping them would be to encourage them to deal with their debts through the advice of a charity like stepchange and not by getting them into more debt.

So please evaluate your own circumstances, but do take into account what I have said, because in my case my life now would be so much better if my parents had just said NO.

Thanks for reading.

chalkie99

Good post.

There is a "sticky" thread here:

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

which is much less visible now than it used to be but contains over 900 posts of similar tales.

iolanthe07

I've been following your posts over the years, Michael, and am sorry that you had to declare bankcruptcy. I hope it will offer you a fresh start with a clean sheet, and you'll eventually be able to repay your parents. I have helped my family out in the past with 'loans', suspecting that they probably won't be paid back - but I'm fine with that; perhaps your parents are too.

DCFC79

Thankyou for sharing. Its a very true example of what can happen in this instance.