Lending family money

[gymgurl]

So about three years ago my younger brother (he's now 20) came to me because he found his 'dream car' (he's the biggest car guy I know...) and needed a little extra money to buy it. At this point he had just graduated high school and had just started working so getting a loan wasn't really possible for him because he had zero credit. I had money sitting in my savings account so I decided it would be alright to lend, he was working full time and had this whole payment plan though out.

Then a few months later he lost his job and had a hard time finding work. It was fine, I didn't push it, I figured he'll pay me back eventually.

This past year he's started apprenticing as an electrician and is making fairly good money however the car (it's a mustang) is having issues and he's had to sink a lot into it for repairs, parts, speeding tickets -stupid kid, etc. Money was starting to get pretty tight for him again and he came to me about two months ago and told me he was completely broke (like $10 in his bank account) and had a credit card bill he had to pay and insurance. I obviously wasn't going to let him starve and I'm in a fairly good financial position right now so again I lent him money to cover it. Now it's up to $5000 that he owes me though and I'm not sure what to do.

I'm debating approaching my parents about it as they have about $15000 saved away for each of us for a future house and maybe they can just transfer $5000 from his account to mine. It's kind of frustrating because now I'm starting to lose interest on this money, I could have it invested or something. I'm a little concerned though if I tell it's going to destry my relationship with him or else my parents will just tell me it's my problem and I shouldn't have lent him money in the first place.

Has anyone dealt with anything like this? Lesson learned to NEVER lend money to family again but for now I need to figure out how to resolve this issue.

[dengeist]

When dealing with family and loans, I never consider it a loan, I consider it a gift because you never know if you're going to get that money back. I don't do it all that often either for that very reason.

[wordsmith]

Obviously stop loaning your brother money, but you've said you're going to do that, so that's good. It's not really your obligation to bail your brother out, and nobody ever starved because they were late on a credit card payment. I wouldn't count on your parents making up the difference, because that's not really their job, either (nor is it their job to hound your brother for the money that you willingly lent him). Unfortunately, I think you might just be out of luck on the money you're already out.

It's been said before, but personal loans really need to be made with the understanding that they're for all intents and purposes gifts, and seeing the money come back is never a given. That's the problem with personal loans. They say you should never let a friend or family member borrow more than you're comfortable with parting with should you NOT see it back, because that's always a possibility.

[GoogleGirl]

I have much experience in this area. I've loaned my mom quite a bit of money in the past few years, and I'm still waiting to get some of it back. I've really had no problems because my mom always pays me back, but I'm getting in a tight squeeze since I can't have a job right now (student teaching) and I live alone (bills can't be split with anyone). Sucks, but it's family and it is really hard to say no to family. Unless you know for total sure that your family is not worth your time, effort, or concern. :frustrate

[capella]

See this is the thing. I don't think it's a matter of not caring about your family. I won't loan them money. Period. I don't have it and I know for darn sure I wouldn't get it back. I also don't ask them for money. That's how it works.

I know that if my sister keeps screwing up her life, not listening to me and keeps making generally bad decisions... she will be coming to me asking for help. She will get a big, absolute, for certain, NO. It's not a good idea to make a personal loan to anyone. Especially not if the person in question is already making bad choices and getting themselves into trouble. I worked hard to get where I am and I am not going to be guilted into bailing someone out who hasn't done what they needed to do.

[gymgurl]

Thanks for your replies. I guess i honestly thought he would pay me back, He seemed to have a good plan in order but it just fell through. I feel bad to keep hounding him on it but it just seems I get no where. I don't expect my parents to pay for what he owes, I was just thinking more along the lines of transfering his money they have saved to me to make up for it...but I guess that's a discussion to have with them...as no one here will know what they will say.

Do you think I should confront my brother first before going to my parents or just go straight to them? I guess I just don't want this to turn into a huge family fight.

[wordsmith]

Depending on what it was for, I would absolutely give my family money if they needed it and I had it to give...but I would GIVE it to them, not loan it.

I don't think you should involve your parents at all in this since you're both adults. It's not fair to put your parents in the middle.

[spiritedaway]

Sorry, IMHO, I also don't think that you should involve your parents AT ALL. You should talk to your brother - directly - about it and sit together and make a realistic timetable of when he's going to pay you back. Your parents were not involved when you made the loan to your brother, so I don't think they should be involved now. Your parents may have some money saved up for your brother, but that's exactly IT. They saved it for "him". He can choose to spend it or return it to you, but you should not expect your parents to transfer it over to you. (Is there a reason why your brother ask you, instead of your parents, for help?)

If you really need the money back, you can ask your brother to talk to your parents to get that money and THEN return it to you. It would be unfair to get the parents in the middle now. You made a loan that you may not get back, but let be be a lesson learned and chalk it up to a "bad loan" and write it off to helping family.

When I make loans to family, I usually consider it a "gift" and don't expect to get my money back. If it is a bigger amount, I'd set out the conditions and keep lines of communication open. I don't involve 3rd parties when the matter is strictly between 2 people.

Just my 2 cents. Good luck.

Thanks for your replies. I guess i honestly thought he would pay me back, He seemed to have a good plan in order but it just fell through. I feel bad to keep hounding him on it but it just seems I get no where. I don't expect my parents to pay for what he owes, I was just thinking more along the lines of transfering his money they have saved to me to make up for it...but I guess that's a discussion to have with them...as no one here will know what they will say.

Do you think I should confront my brother first before going to my parents or just go straight to them? I guess I just don't want this to turn into a huge family fight.

[spokes]

she borrowed him the $$ for a car, not for groceries or rent - there are lots of cars out there, but that an aside.

if i were you i'd have a heart to heart with him, tell him that you will not be borrowing him any more money. tell him that he should be paying you back, and tell him that as a last resort you'll be approaching your parents. if you do approach your folks maybe only ask for $300 or os.

my guess is that if you drag your folks into this it is going to be messy.

[wordsmith]

she borrowed him the $$ for a car, not for groceries or rent - there are lots of cars out there, but that an aside.

No, actually, she lent him money beyond what she lent him for the car, to pay his bills:

"Then a few months later he lost his job and had a hard time finding work. It was fine, I didn't push it, I figured he'll pay me back eventually.

This past year he's started apprenticing as an electrician and is making fairly good money however the car (it's a mustang) is having issues and he's had to sink a lot into it for repairs, parts, speeding tickets -stupid kid, etc. Money was starting to get pretty tight for him again and he came to me about two months ago and told me he was completely broke (like $10 in his bank account) and had a credit card bill he had to pay and insurance. I obviously wasn't going to let him starve and I'm in a fairly good financial position right now so again I lent him money to cover it. Now it's up to $5000 that he owes me though and I'm not sure what to do.

if i were you i'd have a heart to heart with him, tell him that you will not be borrowing him any more money. tell him that he should be paying you back, and tell him that as a last resort you'll be approaching your parents. if you do approach your folks maybe only ask for $300 or os.

my guess is that if you drag your folks into this it is going to be messy.

Why should her parents pay ANYthing? They don't owe her money.

[pisces2473]

I'm sorry, but why does a (then) 17 year old need a Mustang? You should have said no.

[gymgurl]

Thanks again for the replies.

I'm not asking my parents to PAY anyone money. They have $15000 set aside for each of us in a bank account that we could use for whatever we chose (school, house, etc). He should have originally asked them to use this money for his car but he knew they wouldn't let him so he came to me. What I am considering asking them to do is take the $5000 from his account and move it to mine, so then it is like he paid me back (technically this money is his anyway, just for the future).

Having the heart to heart with him sounds like a good idea though...and telling him if something doesn't happen soon I will discuss it with my parents. I don't want to really get them involved but at the same time I do not want to lose the money. I should have never lent it to him in the first place, but obviously he seemed fully intent on paying it back and had a payment plan and everything. Plus, I do love the kid so I guess I just had faith he would follow through. If it wasn't such a large sum and like $500 I'd probably let it go, but this is a fair amount of money that I could be investing right now.

[winneythepooh7]

If it's really bothering you and you want him to pay it back, as soon as he gets a little more on his feet, he should start paying back the money. Even if it's a little bit each month until he gets more financially stable. But like has been pointed out already, when it comes to family, I personally feel like it can't be looked at as a loan.

[AuldSyne]

I think its simple enough. STOP lending him money! Don't bother with the heart to heart talk. You only have to wait till the next time he hit you up for money, then let him know you would be happy to loan him the money as soon has he pays the previous loans.

Lending people money is just stupid, because the best you can do is break even on the original ammount. (Excluding the interest you could have made on investment or the "Time Value Money" of then and now for you accountants.)

(Excuse my grammar, I just had a little too much to drink today.)

[wordsmith]

I think its simple enough. STOP lending him money!

Right, but that doesn't get her the 5 grand back, which is the real issue. Also, one for which I think there's probably no resolution likely.

[gymgurl]

So I talked to him about it in a calm and civilized manner today and he said what his plan to do is to pay off the credit card bill, then get working so he can take out a loan from a bank for $5000. He'll then give me the money so then he is paying the bank over time instead of me. He was really scared about me telling my parents though and seemed to think they'd make him move down to live with them (we both share the old house our parents used to live in).

So this would be okay right? Like technically speaking that could work? I told him as long as he remember that paying me off was a priority then I was fine with it taking a little longer (plus it's good to be getting it in one lump sum instead of small payments spread out over years....).

And yup, NEVER lending money to that boy again...lesson definitely learned.

[wordsmith]

It's probably best for him to take out a loan of that size with a financial institution that he HAS to pay back, anyway. Hopefully it will work out.

[gymgurl]

Yah, that's what should have happened in the first place, with the insurance money I lent him though it was a problem of just getting the loan. So once he gets on a bit better standing hopefully it will be better.

[winneythepooh7]

I think this is an excellent idea. Plus, if he pays off the loan in a timely manner, it will help boost his credit.

[WorkInProgress]

Depending on what it was for, I would absolutely give my family money if they needed it and I had it to give...but I would GIVE it to them, not loan it.

I don't think you should involve your parents at all in this since you're both adults. It's not fair to put your parents in the middle.
Totally agree with all of this. I don't see how dragging your parents into this situation will improve anything, and it's not really fair to ask them to give you part of their gift to him (without his knowledge or approval?). I do see how this could very easily screw up a whole lot of family relationships. (And it's not like you need the money, judging from your post. That would be a different situation.)

[imajican]

I'm a sucker for loaning family members money. But I've paid the price.

Odd that I'm always the family member without the job. They have the jobs but I'm the one they come to for money. I never once asked anyone in my family for a loan.

A few years ago my brother moved back to the area. He's had some legal troubles and was paying off a lawyer which I understand is expensive. At that time I was jobless (as usual). But ya know what? He came to me and asked to borrow $1000. I did it because I love my brother. I hated the troubles he was going through. Besides I'm the black sheep of the family and it would make me look even worse denying my brother the money. So I sent him the money through PayPal.

Guess what? He never paid the money back to me. Thank the gods my mom has helped me a bit in paying it back because it has ruined my credit card. I went from paying only $10-$20 a month on my credit card to having to pay $80-$90 a month on it. I mean I wouldn't make a big deal about it. When I lived at home I never had to pay rent. And I lived at home for quite a long time so it more than makes up for it. But now my brother is back living with my parents since I moved out last year. He has a great full-time job working for the cable company. Got a promotion. I don't know if he's still paying of lawyers. I don't question is financial situation. But he's not paying rent so I don't know where the money goes to.

I just know I'm still having a hard time paying off my credit card bill. I hope it hasn't ruined my credit history. I've been late on payments at least. I don't even charge on it anymore except for a monthly bill I get.

But to make a long story short. Be weary on lending money to family. It's too personal.

[AuldSyne]

Right, but that doesn't get her the 5 grand back, which is the real issue. Also, one for which I think there's probably no resolution likely.

I think that's another issue, where a person lending money he/she can not afford in the first place.

I say consider it a lost and don't mention it till the borrower bring it up. Or you can push for it, but expect to buckle up for alot of wonderful plans of the repayment, and tear fill excuses over and over again.

"For if Shakespeare wrote, ‘Neither a lender nor a borrower be, for loan oft looses both itself and friend, and borrowing dulls the edge of husbandry’, we might remember that he wrote it 400 years ago."

[GoogleGirl]

So I have had to lend my mom some more money today. Got a call today. She didn't ask me for money, she was just like...I'm sorry, but I need you to do this. No "Can you help me out?" or "Can you please do this for me? I really need some help". In other words, she didn't ask me for money. She told me to give her money. The only reason I did it was because she's my mom. But we got into a huge spat about the predicament with my boyfriend and his financial problems. It's a huge mess for me right now and I can't stop crying. I'm stressed out so damn much and I feel like I'm about to go down the sink hole financially. I can understand why money causes so many people in go into depression. I'm definitely hitting a minor depression point right now. :googly:

[jrwilheim]

So about three years ago my younger brother (he's now 20) came to me because he found his 'dream car' (he's the biggest car guy I know...) and needed a little extra money to buy it. At this point he had just graduated high school and had just started working so getting a loan wasn't really possible for him because he had zero credit. I had money sitting in my savings account so I decided it would be alright to lend, he was working full time and had this whole payment plan though out.

Then a few months later he lost his job and had a hard time finding work. It was fine, I didn't push it, I figured he'll pay me back eventually.

This past year he's started apprenticing as an electrician and is making fairly good money however the car (it's a mustang) is having issues and he's had to sink a lot into it for repairs, parts, speeding tickets -stupid kid, etc. Money was starting to get pretty tight for him again and he came to me about two months ago and told me he was completely broke (like $10 in his bank account) and had a credit card bill he had to pay and insurance. I obviously wasn't going to let him starve and I'm in a fairly good financial position right now so again I lent him money to cover it. Now it's up to $5000 that he owes me though and I'm not sure what to do.

I'm debating approaching my parents about it as they have about $15000 saved away for each of us for a future house and maybe they can just transfer $5000 from his account to mine. It's kind of frustrating because now I'm starting to lose interest on this money, I could have it invested or something. I'm a little concerned though if I tell it's going to destry my relationship with him or else my parents will just tell me it's my problem and I shouldn't have lent him money in the first place.

Has anyone dealt with anything like this? Lesson learned to NEVER lend money to family again but for now I need to figure out how to resolve this issue.

Okay...I don't think it's wrong on principle to lend money to family. Family should help each other out in desperate times, and that may include loans of money.

My basic question here is, what did you know of your brother's character before you lent him all this money? Did you have any reason to believe he was irresponsible or unlikely to pay back money he borrowed from you?

I don't think you should have lent him money for the Mustang. A basic set of (used) wheels to get to and from work is one thing, but my attitude would have been that if he wanted a Mustang, he could save up for it on his own.

The money you lent him when he was out of work and got desperate is different, though. I've borrowed from family in this situation, and the relative I borrowed from knows I will pay her back as I am able to. That kind of loan I think is a different situation from, "lend me five grand so I can buy an expensive set of wheels." I think helping your brother in hard times is part of what family is all about. And the fact that he asked for a loan, and not an outright gift, shows that your brother does see himself as responsible for his own life.

I really don't think it's a good idea to get your parents involved in this. You and your brother are both adults. Going to your parents and asking them to repay his debt by transferring $5,000 from his account to yours is just going to make your brother feel infantilized and resentful. It also probably won't work--your parents could throw up their hands and say this is a matter for the two of you to work out.

I think you should confront your brother directly and insist that you and he work out a plan for repayment of the $5,000 he owes you. You might consider asking him to seet up an automatic monthly payment through his bank.