Loan to a Family Member

[anonymous-user]

A family member has a cash flow problem so I am considering making a significant cash loan. I am not expecting any interest or for repayments to restart for a year or two.

However I DO want the money back! Is there a legal agreement that I could use for this purpose to document the loan and agreed repayments? Someone told me such agreements are not valid between family members whoch I can't see why they wouldn't be.

I know the general advice will be "don't do it" but you have to help kith and kin right?

TIA

[Northernboy]

Legal agreements are worth very little if the person chooses not to pay you back.

A court will make an order of it’s clear it was a loan, but what happens after that?

There are a lot of ways that it can sour a relationship even if it’s paid back on time. The recipient can end up unhappy that they are scrimping and saving to pay back money to someone who they feel doesn’t need it, and the lender can be aggrieved if it’s coming back on time but the borrower is posting on Facebook about their night out or holiday when they could instead have paid it back more quickly.

[105.4]

MikeStroud said:

A family member has a cash flow problem so I am considering making a significant cash loan. I am not expecting any interest or for repayments to restart for a year or two.

However I DO want the money back! Is there a legal agreement that I could use for this purpose to document the loan and agreed repayments? Someone told me such agreements are not valid between family members whoch I can't see why they wouldn't be.

I know the general advice will be "don't do it" but you have to help kith and kin right?

TIA

It’s highly likely not to be a loan, but a gift.

I’d suggest not lending the money unless you can easily afford to lose it.

[vulture1]

Are you willing to fall out and lose that relationship with said family member?

[CarCrazyDad]

MikeStroud said:

A family member has a cash flow problem so I am considering making a significant cash loan. I am not expecting any interest or for repayments to restart for a year or two.

However I DO want the money back! Is there a legal agreement that I could use for this purpose to document the loan and agreed repayments? Someone told me such agreements are not valid between family members whoch I can't see why they wouldn't be.

I know the general advice will be "don't do it" but you have to help kith and kin right?

TIA

My personal view is that you should make a reasoned approach as to whether the money is going to be returned or not.


Are they in work, sensible with their money? Everyone can get themselves into a hole with debt, it's easily done.

If they are the type to have new cars every 6 months despite a CCJ and 2 more upcoming , working in lad brookes, then probably best not to, If they have a good job and just made a few bad decisions in the past , then that's a lower risk.

You can draw up legally binding agreements. but then the difficulty is getting them to pay, I guess worst case, take them to court.
If they have an asset like a house or car, could you not write this into the loan, that ownership is transferred until debt is repaid?


I've lent my son £10k in the past over a 5 year period, he paid it back in full, it made sense for him to borrow from me, rather than a bank, he gave me £11k back, so £1k for a 5 year loan is much better than any bank offered him.

[V1nce Fox]

If you can’t afford to lose it, you can’t afford to lend it.

[journeymanpro]

Don't, just don't.

[Pit Pony]

MikeStroud said:

A family member has a cash flow problem

you (I) have to help

TIA

Do you understand the true reason for thier cash flow problem? Do they understand the reason?

If you bail them out now, will they learn anything without having the pain?

I'd rather give family money, with no strings attached, but some of my extended family, I wouldn't piss on them.if they were on fire. Others I'd.give them.the shirt off my back.

[Zumbruk]

Depends on the family member. I made my Mother a bridging loan, which she paid back on time and as agreed, but I wouldn't lend my brother a fiver until tomorrow.

[Om]

Seriously, don't do it. We did something similar last year to help out my partner's brother who had been seriously ill, debts mounting and house soon too be repossessed. I think my partner said those words 'but you have to help kith and kin right?' and I happily agreed. Legal agreements etc in place, lots of our savings expended.

Turns out the agreements are pretty meaningless (the only way we can exercise them is to make someone who is now considered a vulnerable person homeless) when the person turns out to be an inveterate liar with a tenuous relationship with reality.

We still have the legal agreements but that warm fuzzy feeling from helping out a family member are long gone.

[aaron-j9c9a]

As other have said don’t lend it unless you can afford not to get it back.

I’m surprised at how many people say don’t do it. Guess my family situation is a lot different from many where we are all tight knit and would help each other out where we can (inc money without repayment).

[Northernboy]

aaron-j9c9a said:

As other have said don’t lend it unless you can afford not to get it back.

I’m surprised at how many people say don’t do it. Guess my family situation is a lot different from many where we are all tight knit and would help each other out where we can (inc money without repayment).

My family’s like that, which is why I happily lent £5,000 to a cousin when he needed help. He never paid any of it back, but he did buy himself a nice Mercedes convertible a year later, so I suppose some good did come out of it.

[LeoSayer]

Are you the lender of last resort? In other words, are they unable to borrow from banks?

How close are they to being bankrupt?

How good are they at managing their finances?

What assurances can they give about paying you back?

Could you first offer your help in managing their finances to see if there's a better approach (eg talking to lenders) than just throwing money at the problem?

[hotchy]

Its always best to lie and deny that you have any savings. Just because you have a nice car and house doesn't mean you have a load of savings. I'd give money to my parents if ever required. I wouldnt loan them it, they could keep it. However they are considerably better off than me so I doubt that'll ever happen.

I learned that at 17. My sister still owes me £12.50 for a takeaway when my parents where on holiday back when I lived at home. Still bring it up, still won't pay. Still scrounges off the parents and lives in the house at 38... surely embarrassing to say that to friends but what do I know.

[The Mad Monk]

MikeStroud said:

A family member has a cash flow problem so I am considering making a significant cash loan. I am not expecting any interest or for repayments to restart for a year or two.

However I DO want the money back! Is there a legal agreement that I could use for this purpose to document the loan and agreed repayments? Someone told me such agreements are not valid between family members whoch I can't see why they wouldn't be.

I know the general advice will be "don't do it" but you have to help kith and kin right?

TIA

What can possibly go wrong?

[chemistry]

I wouldn’t do it.

But if you feel obligated to help and it’s just cash flow, could you buy some of their assets e.g. their car(s) and put them in your name, insure them, etc.

They can still use them but if you need the money back then you’ve got something (that they can’t sell) to take back that you can liquidate.

[anonymous-user]

A “cash flow problem” lasting 2 years before repayments begin? My alarm bells are ringing.

[Carbon Sasquatch]

MikeStroud said:

A family member has a cash flow problem so I am considering making a significant cash loan. I am not expecting any interest or for repayments to restart for a year or two.

Cash flow to me means there is (close to) guaranteed income at a defined point in the future.

I’ve lent money to family before, but only ever got it back in full when there is a significant lump sum due and we agree that will be the source. Where extended repayments are involved there always seems to be some excuse somewhere along the way and once they stop, they never start again.

These days I tend to just lie - I can only get my hands on X but need by back by this date for this reason. Or I can do this, but it will mean me doing without that.

Many people seem to think that if you have excess cash just sitting there then there is no need to repay, so I always make it clear that I haven’t.

As above, legal agreements only make sense if you’re prepared to enforce them - which is pretty much the end of any relationship.

[Captain Raymond Holt]

As said above.

Wouldn’t do it, unless you’re happy to be thought of as the family piggy bank.

[Zetec-S]

Northernboy said:

There are a lot of ways that it can sour a relationship even if it’s paid back on time. The recipient can end up unhappy that they are scrimping and saving to pay back money to someone who they feel doesn’t need it, and the lender can be aggrieved if it’s coming back on time but the borrower is posting on Facebook about their night out or holiday when they could instead have paid it back more quickly.

^^^ This ^^^

We've lent my SiL small amounts of money over the past few years, mainly because she is useless with money and up to her eyeballs in debt. Yet manages to waste money on crap she doesn't need, most recently £50 on a custom made picture frame yet come the end of the month had no money to feed the kids

Last time we lent her money we were reluctant as we knew we needed that money in a couple of months for something. We agreed but said we'd need it back within 3 months. Her response - "can't you use your credit card for that?"