Urgent advice needed - taking out a personal loan for a family member

RichardDuck

Hi all,

TL;DR (background detail below) - I've been asked to take out a personal loan of £8000 for a family member over 7 years. They expect to pay me back in full in 6 months. I'd like to know:

• Is this legal i.e. not considered fraudulent lending?
• How much will this impact my own ability to take out loans for myself?
• Is there anything else I should be taking into account while I consider this?

This week I have been approached by a close family member, who is in a tough financial situation where they are struggling to keep up with the repayments on their current loans. They're in the middle of home improvements, and they plan to remortgage their house once those improvements are done to free up extra cash. It's my understanding that they can't remortgage while the home improvements are still in progress.

They have asked me to take out a personal loan of £8000 over 7 years to help them out, and they will pay me the full amount in six months once they receive some money they are expecting in Q2 of this year. This family member is not currently working due to health reasons, and the money they are expecting in Q2 is from health benefits, but this is not guaranteed. They would use the £8000 to pay off the interest on their current loan(s).

It's also worth noting that they have reached out to others within the family, who are able to help them out up to a point.

Admittedly, I'm quite inexperienced in regards to finance. My credit is good, but I've never taken out a credit card/loan before and realise it would be a good idea to do so in the future to aid my credit score for when I'm looking to get a mortgage.

While I've been assured that none of this money will ever come out of my pocket as they will be repaying the loan on a monthly basis, I can't guarantee that the money they're expecting to use to repay me will come through. I don't want to find myself in a situation where I'm financially unstable.

Apologies for the wall of text above, but I'd be very grateful if anyone is able to share their thoughts/experience on:

• Whether this is legal i.e. not considered fraudulent lending
• How much this might impact my own ability to take out loans for myself
• Whether there's anything else I should be thinking about as I consider this?

Grumpelstiltskin

Two words barge and pole.

Unless you can afford to lose this amount don't touch it.

tacpot12

It will not be fraudulent if you declare the purpose of the loan correctly: it is a gift to a family member who is struggling financially due to debt.

It will impact your own ability to take out loans based on how much of your disposable income is consumed in making the repayments, for the next 7 years or until the loan is paid off.

You should definitely consider what this will do to your relationship with your family member if they do not repay the loan. MSE has many posts where loans made to friends and family members have not been repaid and the person who has lent the money is in financial difficulties as a result. You need to consider why this person has so much debt. If they can't repay a commercial lender, will they be able to repay you? Your debt to the loan company can be enforced in law, your loan to your family member probably won't be enforcable.

If you "lend" this person the money, don;'t be surprised if their benefit lump-sum does not arrive, their home improvements are never finished and they never remortgage. Treat it as a gift to them, and only give it to them if you can afford not to get it back.

Pixie5740

RichardDuck wrote: »

Hi all,

TL;DR (background detail below) - I've been asked to take out a personal loan of £8000 for a family member over 7 years. They expect to pay me back in full in 6 months. I'd like to know:

• Is this legal i.e. not considered fraudulent lending?
• How much will this impact my own ability to take out loans for myself?
• Is there anything else I should be taking into account while I consider this?

This week I have been approached by a close family member, who is in a tough financial situation where they are struggling to keep up with the repayments on their current loans. They're in the middle of home improvements, and they plan to remortgage their house once those improvements are done to free up extra cash. It's my understanding that they can't remortgage while the home improvements are still in progress.

They have asked me to take out a personal loan of £8000 over 7 years to help them out, and they will pay me the full amount in six months once they receive some money they are expecting in Q2 of this year. This family member is not currently working due to health reasons, and the money they are expecting in Q2 is from health benefits, but this is not guaranteed. They would use the £8000 to pay off the interest on their current loan(s).

It's also worth noting that they have reached out to others within the family, who are able to help them out up to a point.

Admittedly, I'm quite inexperienced in regards to finance. My credit is good, but I've never taken out a credit card/loan before and realise it would be a good idea to do so in the future to aid my credit score for when I'm looking to get a mortgage.

While I've been assured that none of this money will ever come out of my pocket as they will be repaying the loan on a monthly basis, I can't guarantee that the money they're expecting to use to repay me will come through. I don't want to find myself in a situation where I'm financially unstable.

Apologies for the wall of text above, but I'd be very grateful if anyone is able to share their thoughts/experience on:

• Whether this is legal i.e. not considered fraudulent lending
• How much this might impact my own ability to take out loans for myself
• Whether there's anything else I should be thinking about as I consider this?

It's not fraudulent if you answer the lender truthfully when asked for the purpose of the loan. If you do take out the loan it will reduce the amount you can borrow ie it will impact your affordability.

Will you be expected to make the loan repayments until your relative can pay you back in a lump sum? What happens if these health benefits never materialise? How does your relative expect to be able to remortgage to release if equity if not currently in employment? No income, no mortgage.

Personally I'd say no. Your relative can wait until they're back working again to finish the home improvements and if (s)he is struggling with debt in the meantime direct them towards National Debtline for advice.

DCFC79

Taking out finance wont aid your score since only you can see it, your credit history is what lenders see.


Money and family is rarely a good mix.


Maybe they should look at what the money is being spent on and cut back.

comeandgo

If you want to help this family member do so but do it with the impression you won't get the money back and if you do then that's a bonus.

HampshireH

Don't do it. Consider the following when making your decision.

Your considering loaning to someone who;

• MIGHT start receiving benefits
• ISN'T working with a steady income
• CAN'T pay their current debts
• Continues to do home improvements despite having noway of funding them
• May not be able to remortgage in 6 months time
• Cannot possibly promise with 100% certainty they will pay you back
• Won't be blemishing their own credit history when they don't pay buf will allow you to shoulder the responsibility

If you cannot afford to gift it (and that means not expect it back) don't do it. They should respect your decision. Their lack of financial planning is not your responsibility

Blackbeard_of_Perranporth

Question
Can you afford to wave goodbye to £8,000?

If no, give them a £100 and walk away.

Mojisola

RichardDuck wrote: »

They have asked me to take out a personal loan of £8000 over 7 years to help them out, and they will pay me the full amount in six months once they receive some money they are expecting in Q2 of this year.

This family member is not currently working due to health reasons, and the money they are expecting in Q2 is from health benefits, but this is not guaranteed.

It's also worth noting that they have reached out to others within the family, who are able to help them out up to a point.

In what world can someone expect to get an £8000+ payment from health benefits?

How much in total is this person borrowing from you and the others?

Are you all being promised repayments from the same lump sum - or are the promises unrealistic?

Don't do it unless you can fund the repayments yourself and don't mind your relative walking off with your money.

System

How much will this impact my own ability to take out loans for myself?

Massively. Existing loans will restrict how much you can borrow and may even prevent you getting a mortgage or at least an amount you need.


So they're doing up the house and hope to repay you by remortgaging the house in 6 months time? Just how do they intend to increase their mortgage when they're not in work and living on sickness benefits which pretty much no lender will count as income when applying for a mortgage or remortgage? Just having the house worth more isn't enough, a lender needs to see you've enough income to repay it. And given that a higher mortgage is going to mean higher repayments and that social security benefits are set to meet basic costs of living just how do you think they're going to manage to pay the mortgage and pay you too?

The best thing you could do is to say no and advise them that they stop doing the home improvements until they can afford them. If you want a get out of jail free card say you applied for a loan but was declined.

jonesMUFCforever

Anyone else think this thread is a wind up?