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02-03-2009 01:27 PM #1Deal GURU
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Don’t Lend Friends Money Without Reading This
By Sally Herigstad
There’s a girl we’re going to call Alana who is the prime example of how not to lend financial support to friends and family. Alana only wanted to help. She bought her unemployed friend a truck so he could look for work. She put the truck in his name and the loan in hers – now the friend and the truck are gone and she’s still paying off the loan.
Most people don’t buy trucks for their friends, but you’d be surprised how many people get into financial difficulty trying to help a grown child, a romantic interest, or even an acquaintance with a sad story.
You can help people without jeopardizing your own financial stability. Next time someone asks for help, remember these tips:
If you lend someone money, get everything in writing, including when you expect to be paid back.
Don’t co-sign on a loan unless you are prepared to make the payments yourself if the borrower doesn’t.
Remember, you can’t solve all of anyone’s problems. Unless you are very, very wealthy, you can’t go around adopting adults and letting them become your dependents.
Be honest about what you can afford. You might be able to help with a doctor bill or fill their gas tank so they can get to work. If you can’t afford to pay their rent, admit it.
Concentrate on helping people with one problem at a time. For example, if they need a job, you can help them write a resume or give them rides to job interviews. Don’t buy them a truck!
Sally Herigstad is a CPA who has written extensively on personal finance issues. She is also the author of “Help! I Can't Pay My Bills.”
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02-03-2009 01:51 PM #2Budget101 Guru
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Re: Don’t Lend Friends Money Without Reading This
GREAT ADVICE. Thank you for posting this.
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02-03-2009 01:55 PM #3Deal GURU
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Re: Don’t Lend Friends Money Without Reading This
You're very welcome! I hope it helps someone.
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02-03-2009 03:39 PM #4Budget101 Done Digging
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Re: Don’t Lend Friends Money Without Reading This
We have helped friends and family so many times over, and it turned out bad every time. Now we don't loan anything to anyone. Sad but true.
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02-03-2009 03:44 PM #5 Re: Don’t Lend Friends Money Without Reading This
my boyfriend loans money out to friends and gets it in writing. Problem is even with the agreement some of them we cant get to pay even 20.00 a month. I keep telling him friends and family will stick you before anyone else will. One day he might listen.
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02-04-2009 08:54 AM #6 Re: Don’t Lend Friends Money Without Reading This
Never co-sign a loan- whether you have anything in writing or not, whatever loan papers you signed you agreed to pay even when the "borrower" doesn't pay. At my last job we discouraged our members (I worked at a credit union) to co-sign loans. More times then not if someone needs a co-signer then they shouldn't be getting a loan period. To need a co-signer your credit has to be pretty bad. Young adults with no credit history can build credit without getting a car loan believe it or not. Even co-signing a loan for your children is never a good idea when they want a new car. It is not mean to not co-sign, they should learn that you have to start off with not so much a dream car as you start off with what you can afford- if that means they have to save up for a $1500 car then so be it. Just say no to co-signing!
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02-04-2009 10:18 AM #7 Re: Don’t Lend Friends Money Without Reading This
A friend of mine asked me once to borrow $500 and I sadly told her no since I was saving up for a new car at the time. I did offer to spend the day with her going to banks and credit companies trying to figure it out. I have kind of always regretted helping her since she is such a good friend but who knows how it could have turned out?
Another friend was in a similar situation and asked for about $50 but all I had at the time was $20 - never saw it back and she never mentioned it again. She did go through a rough patch and it took her about a year to climb out of it but I don't feel like its appropriate to ask for it.
Money is such a sticky situation especially with friends. Thank you for this post! It's so difficult to know exactly what to do when put in that situation.
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02-04-2009 05:55 PM #8 Re: Don’t Lend Friends Money Without Reading This
It is I borrow my friend 1000 $ and never see it back
Bye bye money
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