Lending money to friends & family

MABLE

bel2310 wrote:

Hope this is the right place to ask this. I am considering lending a friend £10,000. We are using a written agreement and the intention is she will pay back over 3 years, with 5% interest. However I am not quite sure how to calculate the total amount, I originally thought it was just 5% on 10,000,i.e. 500 but she has pointed out to me that loan companies don't add the interest in just one lump like that. Can anyone explain to me how I should work it out,
Many thanks

If your friend has a good credit rating then should could borrow from Zopa and get a really low interest rate. In my opinion borrowing to friends whether you have a drawn agreement or not is a definately a no no.

ReportInvestor

Many of us are defaulting on payments to banks in spite of their legal hold over us (IVAs and bankruptcies are ballooning).

Why should we pay anything back to family or friends who have no legal hold over us?

In fact, don't we also have an emotional hold over them when push comes to shove? And don't many people shamelessly exploit this?

I know for a fact (no link unfortunately) that debts to family and friends very often remain unredeemed for those reasons.

MABLE

No doubt your friend has every intention of paying you back but some things are beyond our control, ie losing ones job, illness etc. In the event of the latter I do not really see how a written agreement would help you. If your friend then finds she is unable to pay you back what would you do take her to court and if that were the case your friendship would be lost. As I have said before never loan money to friends.

nichesell

I accepted money from my family and gave them double in return within 2 months. But on the 3rd investment adsense disabled me and I was stressed right out. For a little while anyway.

savememorecashmartin

quickstepqueen wrote:

Thanks for this thread because a) it helps me vent my feelings and b) makes me realise that we are not the only ones to trust family and friends so easily.

It seems there is a lot of this about - I thought I was the only one who had suffered this way..... I lent a someone ££££lots to finance a work vehicle after they had gone through a selection of torrid, rotten, unreliable piles of scrap, spending hundreds on emergency repairs and wasting time that could have been spent working, you all know the story by the sounds of it.

The money was LENT gladly to help him out and know that it would get him and his gear to and from work. I should have guessed really, when he couldn't afford to finance it himself due to a credit history shot to bits.

It all started wonderfully, SO at the bank, money coming in every month. 'What was I worrying about?' I asked myself. Then I found out.

The bank closed his current account because he never had any money, so no more SO and that was the last repayment I saw. I had to keep up the repayments, coz I didn't want to default on the loan. Cost me four grand, that 'favour'. :mad:

He couldn't afford to borrow the money and I could, so I felt good about being able to help someone out. I'm lucky I guess because I won't lose my house over it or whatever but that isn't the point.

I feel cheated and silly because I allowed myself to be taken for a ride by someone who had the best intentions at the start but when it came down to it, just couldn't be arsed to honour the verbal agreement and didn't care that the money was coming out of my pocket.

Remind me not to do that again........

Sorry about the rant but I just needed to get that of me chest. Ta.

seven-day-weekend

I learned my lesson (without it costing me thousands) when a friend asked if she could buy some clothes for her children from my catalogue....and ordered £300 worth. I pointed out to her what the repayment would be as she was a single parent with a small income, she insisted she could afford it.

Of course I ended up paying for it after the first two payments - she stopped paying and as it was my catalogue I didn't want my credit rating shot.

I often wonder what she thought happened to the debt. I never told her I paid it.

Now, I would not lend. I would either give as a gift or say no and try to help in some other way.

loulou11_2

hi there,
I am thinking of borrowing some money from my father who will charge me 5% interest. Does anybody know a calculation I can use to work out how much the interest will be?

p1an0player

I am pleased to have found this thread and feel for the posters who have been treated badly. I hope thing are improving for people in difficulty, especially clintus2. My query is relatively minor but I would nevertheless like to post it here.

About 5 years ago I was house-sharing, and ended up helping a housemate with his share of rent and bills, being aware that if I didn't, my own credit rating might be affected. He was really struggling financially, but I was assured by a friend of his that he was reliable and would pay it back. I quickly moved out of the house.

He couldn't and didn't pay back the money, about £370, despite a few gentle reminders over the following year. Reluctantly I gave up.

Now I read this site and know about the wonders of compound interest, I can't help but think how that money would have grown by now. I discovered his details on the internet and am tempted to contact him one more time and give him another chance to pay.

Do you think it's ridiculous for me to even ask after such a long delay? I'm afraid that his response will be "too late to ask now" or "what money"? Have other people had money paid back after such a long time?

At what point do I decide to put a final line underneath it and put it down to experience, for my own sake? As someone else mentioned, continuing to remember such events from the past causes distress and irritation.

chriswuk_2

Your own dad is going to charge you interest ???? What a guy !!

roswell

why shouldnt his dad charge him interest after all if it was money he had in a savings account he could expect 4% PA .... bank of mom and dad need interest to. I excpet Dad will be charging a lot less interest than a bank.