Moral dilemma: loan for family member settlement

MrFrugalFever

What you are doing is very gratuitous towards your family member. In order for me to make my decision, If I were in your position, I would want to know the extent to which the family member is in financial trouble - is paying off the loan going to truly benefit them or will they think that’s great I’ve now got another £xxx spare each month to spend on XXX and so the debt/poor money management continues, which then ultimately your help is in vain and fairly worthless.

£400 interest on £8k owing is pretty minimal, is it really going to shorten the term significantly enough to surprise and delight? I think if you’re going to settle it off, just do it and be done with it. If the family member insists on continuing to pay you back then great, if not then, we’ll it’s a family member and you’ve done a great deed.

Is the loan a personal loan or a secured loan (car finance loan)? If it is a secured car finance loan then what you have done is classed as an accommodation deal and is often frowned upon by the FCA, if anyone got wind of it then problems could arise.

phillw

I would settle the loan, but not tell them straight away.

Then surprise them when they've paid it off early.

If you lent them the money from your own pocket in the first place then would you have charged them interest?

I wouldn't, but the list of people that I would lend to is incredibly small.
 

withaspritz

MrFrugalFever said:

What you are doing is very gratuitous towards your family member. In order for me to make my decision, If I were in your position, I would want to know the extent to which the family member is in financial trouble - is paying off the loan going to truly benefit them or will they think that’s great I’ve now got another £xxx spare each month to spend on XXX and so the debt/poor money management continues, which then ultimately your help is in vain and fairly worthless.

£400 interest on £8k owing is pretty minimal, is it really going to shorten the term significantly enough to surprise and delight? I think if you’re going to settle it off, just do it and be done with it. If the family member insists on continuing to pay you back then great, if not then, we’ll it’s a family member and you’ve done a great deed.

Is the loan a personal loan or a secured loan (car finance loan)? If it is a secured car finance loan then what you have done is classed as an accommodation deal and is often frowned upon by the FCA, if anyone got wind of it then problems could arise.

Personal unsecured loan to me from a bank. The proceeds were used for a car and also insurance for the car (whole year upfront)

The problems that kicked this off weren't poor money management, just a spell of bad luck, several events at once kind of thing. the interest saving is minimal so I think the final outcome will be to shorten the term as a surprise! "It's paid off now" kind of thing.

MrFrugalFever

Sounds like you’ve been a saving grace in a difficult period. Do what your heart tells you, f it were me and a close family member (who has good money management) I’d most likely just settle the damn thing and be done with it! Good luck on whatever you decide.

Bob~24601

Shorten term passing saving on to family member

If it was me, and that I didn't need the money, then I would pass all the saving onto my family member - Its their loan at the end of the day, and keeping any saved interest would just feel wrong for me. 

The amount of interest that you would get from your savings is very minimal.

What I would do tho, is speak to that family member, explain the situation and ask them to continue payments as they are until the actual balance paid is equal to what you have paid out. (ie the amount less interest saved).

I feel it's important to communicate with the family member as its best to be clear, rather than what they might see at a later date that you hid something from them. 

Spendless

Personally I wouldn't use your inheritance to pay the loan off early. Your family member has repaid you back so far, what if there's a set of circs where they become unable to do so for the remaining life of the loan? 

I would go for the alternative suggestion offered, continue as you are and then gift them a little money from your inheritance at the end as a 'nest egg' and so they have the start of a rainy day fund.