Loan to friend: car as collateral

Clive_Woody

poppasmurf_bewdley wrote: »

There is a reason he needs to borrow money off you instead of going to a normal place of business to get a loan.

And that reason is he has a poor credit rating, and no other mug will lend to him.

Don't you be that other mug!

Yes, exactly this.

Banks are pretty good at assessing risk. They see your friend as too much of a risk to ledn their money.

Say no and maintain your friendship.

CHR15

He knows you are a soft touch.
He is taking advantage and walking all over you safe in the knowledge he can repay you whenever he feels like it.

pd52

I don't understand why people just don't say 'I'm sorry I don't have that money available/can't afford it' and just end the matter straight away.

27col

Even if you did manage to get some documentation to get the car as collateral. The mere fact that you can't drive would mean endless hassle for you. just to arrange to take it away.
As has already been stated, the car would be worth almost nothing in a "distress" sale.
It is simply not worth the potential bother which will occur when the loan goes "t""s up". As it inevitably will.
He can't get a loan for a very good reason. His credit is shot.
Don't touch this with a barge pole!!!!
The fact that you say he is "tardy" in repaying loans, just illustrates the fact that he has a cavalier attitude to other people's money, and no sense of responsibility to commitments he has made.

C_Mababejive

Are you starting some kind of fledgling bank or are you in need of assertiveness classes?

Just say no...you havent got the money and give him some leaflets about low cost loans.

uncreative

Have a look at this:

"In economics, moral hazard occurs when one person takes more risks because someone else bears the burden of those risks. A moral hazard may occur where the actions of one party may change to the detriment of another after a financial transaction has taken place."

Its up to you whether the £1,000 is worth it. If it will truly help your friend out and you have £100,000 in the bank then the answer is different to if you have £1,500 in the bank and your own financial issues.

I am a great believer in karma, but dont think for one minute that you wouldnt be approached when there is a repair required!! You will be 'tied' to this car going forward in small ways....

barbiedoll

uncreative wrote: »

dont think for one minute that you wouldnt be approached when there is a repair required!! You will be 'tied' to this car going forward in small ways....

This is exactly what I was thinking. Sometimes, £1000 will buy a great car. But often, it won't. If he buys it with your loan, what happens if a major fault occurs within a couple of weeks? Does he have £300 to replace a dodgy clutch? And how is he going to pay for the tax/insurance? Will that be coming out of the £1000 too? In which case, he's probably looking at buying a £500-700 car...which is an even bigger risk!!!

Don't even go there.