Loans: Borrowing, lending and learning
September 4, 2013
Well well, look at it being September already!
SingleMa had a great topic and discussion thread so I’m borrowing it for both my answers and to ask you what you thought:
1. What’s the most money you’ve ever loaned someone?
B. Did you get it back?
C. How did it turn out?
2. What’s the most money you’ve ever borrowed from someone?
B. Did you pay it back?
C. How did it turn out?
3. Based on the above experiences, what is your current philosophy on personal loans (giving or receiving)?
My Answers
1. [Stupid Alert] As an indirect loan, I’ve purchased a new vehicle for my family and my sibling was supposed to pay me back in the monthly payments. That turned out terribly and cost about $20,000. He probably managed to pay back as much as $7000? I had the paperwork for a long time but decided to get rid of it after it had long been clear I wasn’t going to get another penny out of him.
2. About $50, at most, when I didn’t have cash on hand and paid it back within days. With a couple friends, we’ll foot the bill for each other for one thing or another knowing they’ll either pay you back or get the bill for us the next time. This mostly applies to meals, though occasionally, to things like ordering from a store together to save on shipping.
3. Mostly based on getting burned time and again by my family and their bad (though mostly well intentioned) decisions, I won’t lend to anyone ever again. I’ve been asked to, and demurred, and asked to consider financial commitments that hadn’t previously been part of my plans but so far I’ve steered clear.
An additional question: Do you think your philosophy is subject to change? What would that depend on?
I lent $5 once to a PF friend (now no longer a PF friend), who didn’t have cash to pay for her lunch. She never paid me back even after seeing me a number of times, and I never asked because it was $5 well spent to see her nature emerge.
I don’t count lending money to my mother or BF a problem because they always pay me back, so it’s a moot point, but if we count THOSE times, then I’ve lent up to $500.
I also borrowed $7000 once to pay for tuition, but once my loans were approved, I paid them back immediately.
Now, I don’t give money I can’t afford.
That’s definitely a good point and a cheap lesson to learn at that price. And I agree, the loan has to be money I can do without.
I think the most I’ve lent was about $8,000 to a friend who needed a sort of “bridge loan.” She was being re-located for work and would be reimbursed for her moving expenses, but her EF wasn’t big enough to cover a move of about 2,000 miles plus down payment on an apartment in her new (more expensive) location and living expenses for a month. I had her sign a note and despite me offering to lend it with no interest for the two months she would need it, she suggested a pretty good interest rate be written into the deal. She paid it back on time.
That’s not the first time I’ve lent money to a friend. I also lent a friend about $2,000 a few years ago to cover her during a period of unemployment as she waited for an annuity payment to come in. That friend also paid me back.
I borrowed about $8,000 from an old boyfriend many years ago so I could buy a car (a necessity in the suburbs, where I lived at the time.) We set up a payment plan just like one used when you borrow money from a bank. I paid it all back on time, too.
I guess I’ve had pretty good experiences with lending and borrowing money from friends. I haven’t had to do so with family, although I did gift my niece about $500 for college expenses when she first started. I always try to get an agreement in writing with all the terms laid out. While this may be of little help unless I want to spend a lot of money for court fees, it does formalize the arrangement and underline the seriousness of the commitment.
I don’t lend money. If I do, I consider it not lent but given. This pertaining to family. I don’t think I’ll change over the years. If anything, it’ll strengthen.
Wait, what? Sibling managed to pay back a whole 7 grand? That’s not bad, for him… LOL! Writing off the rest of the loan should be a reward, right?
The most I’ve ever lent was to my ex-, to keep him out of bankruptcy after I left. His mother and I each borrowed against every liquid penny we owned and forked it over to him. I borrowed on margin against my cash and securities and came up with about $40,000.
Borrowing on margin is a very low-interest affair — in effect, you’re borrowing from yourself. I charged him more interest than I had to pay. He did pay it back, and I made a little profit, whilst I kept my own assets invested.
The reason I did this was so my son could go a decent private college rather than being dumped into our state’s shoddy university system. If the ex- had lost his shirt, the kid would have ended up in one of the local third-rate learning factories.
Otherwise, though, I follow a general rule: never do business with friends or relatives.