Have you ever owed money to family?
It sucks.
When I was living in my office, I needed $1,000 a secure an apartment and actually have a place to live. I knew I was going to have that $1,000 in a few weeks, but didn’t at the moment. So, I borrowed from my older brother.
It turned out fine, in a few weeks I mailed him a check, and that was that. But still, I didn’t like it.
I’ve been pretty lucky that even though I owe still owe my mum a ton, she hasn’t freaked out too much. And that she hasn’t been charging me any interest, which is fantastic.
But even still, owing family money just blows. It can change the relationship in a negative way if you’re not careful.
As a rule, I would say never borrow from family or friends if you can avoid it.
Have you ever borrowed or lent to a family member or friend? How did it turn out?
{ 17 comments… read them below or add one }
At least yours had a good ending. Most of the time situations goes sour and the lender never gets paid back.
I always say that if you’re going to loan your friends or family money, just don’t expect to get paid back.
I think it is a terrible idea to borrow money from family members. Their is nothing more important than your family relationships and nothing more risky to that relationship than borrowing money from them.
Yep
Agreed, it’s just not a good situation. I had a cousin that I was very close to growing up that borrowed some money for me, with a promise to pay me via installment plan. She made one payment and then stopped. Eventually she did pay me, but it got pretty tense and our relationship definitely hasn’t been the same since. Since then, my wife’s cousin asked to borrow some money, and we politely declined. That was hard to say no, but that lasted about five seconds, and we’re still very close with her.
So I’ve learned it’s best to avoid it at all costs.
Borrow first from family before friends. Family it can be easier, especially if its your parents. I borrowed money from my parents to go on a backpacking trip and was able to pay them back later in the year when I had the money so it made everything easy.
I agree on borrowing from friends last. I lent a “friend” a rent payment one time, took months to get repaid, awkward.
Not a bad idea at all to borrow interest free from family.
My family never would flinch to help me out, and I wouldn’t either to do the same.
I can’t see how you justify not paying your mother interest?! Think of the opportunity loss of that investment to her, at her age, and the possible tax consequences to her if the IRS audits and decides to classify that money as gifting since you are not paying at least bare minimum rates which I believe they have set around 2%-3% these days. There is nothing wrong with borrowing money from family, but you need to treat it like you would any other loan. My family member lent me $100,000 to puchase an investment property last year. The investment turned out great for us, and we are paying a slightly below market rate 5% in return. Our family member gets to see their money help the family, they get to supplament their income which is mainly from low yielding CD’s, and we don’t have to pay fees et cetera at a bank. Win-win.
Pay your mother interest, it’s the right thing to do.
No crap it’s the right thing to do. My mother however refuses to charge me interest. The reality is that I will be financially supporting my mother long after my debts to her have been repaid. That’s the right thing to do.
We are roughly the same age, and I feel the same about my parents future retirement ability, but that is not a good excuse. If your mother is independantly wealthy, and is not borrowing the money she has lent you then at least pretend to pay the interest and have her send it back so the IRS doesn’t call her on an undeclared gift. If she is not wealthy, and you worried about her future cash flow, have her set the interest aside for you in a savings account that can be used to offset that cost later. Several years ago, my father lent me some money (from his HELOC) to buy my first house. He did not want me paying him interest for the loan, and that was very kind of him. I made my regular principle payments, and diverted the interest portion into an online bank account. Once the loan matured, I made a lump sum payment to his HELOC without telling him. Also, the right thing to do is what’s right now (paying interest) and what’s right later (supporting her). I know I am speaking with limited information on your unique situation, but when it comes to family you don’t want to live by “do the ends justify the means?”.
I am currently owing my mother. I borrowed so I could finish getting my house painted before winter. You are right, it sucks. However, I am paying back a ton each month and plan on having it paid off before Christmas, if all goes right.
With me, it was the other way around: my younger brother asked me for money for a car repair. I had to be very patient to get my money back in installments when I needed my money for moving out expenses.
I agree: It’s best not to borrow from family because often this can hurt your relationship.
I always seem to get the low end of the totem pole when it comes to money and family. Its always great when you can assist them but it’s always a hard battle to get that same sort of reciprocation in my time of need. Nonetheless, I find that when it comes to family the best policy is if you can just give it then do so and be cognizant of the return users and the real reasoning behind those requests…LOL! Money is funny…especially with loved ones right?
I always hesitate to borrow money from family. I love the fact that they would never charge me interest and I know they would always be willing to help me out. Still, if I am unable to pay them back, I will feel as if I am putting a strain on the relationship.
one could borrow from family as no interest is charged. But could be a bad idea in case their needs arises and one could not able to repay on time.
Borrowing from Family might be ok because they are a direct relation and could understand. However, borrowing from friends becomes a menace when you are unable to repay them on time. At that time, your friend get annoy and decide for his life not to lend you a penny again. Therefore, it is not a good idea to borrow from friends.
I try not to lend to family or friends–if they really need money and I want to help them, I try to give them money or find some type of job that I can pay them for. I don’t want any kind of obligation like that dragging down the relationship.
The few times I have loaned money to friends was in the case where they were students and were waiting for their student loans to come in, but had nothing to live on while the loans were delayed. I was happy to loan money in that case, and I was paid back within a week of the student loans coming in.