<p>“It galls me to see someone asking family members whose kids are going to public school for help to keep the kids in private, but they do not see it that way.”</p>
<p>I would make an exception for siblings living in extremely bad public school districts where safety is a concern. One of my siblings moved out of an area with bad schools to an area with supposedly excellent schools but the school district changed over time and one of her children suffered because of it.</p>
<p>Yes, BCEagle, that is a good point. There are reasons to ask for help but sometimes you wonder. To ask for help to pay for a vacation home when you don’t have one, a new car when you are driving a clunker, you really get some outrageous requests.</p>
<p>cptofthehouse, You were extremely kind to do so much for that family - unbelievable that it was not appreciated in some quarters! But I think this is the way these things go. Once you lend money to someone in financial trouble, you become yet another creditor and source of anxiety for them. So the borrower resents the lender, and the lender resents the borrower if any signs of nonessential spending are seen while the loan is outstanding. Very few people can afford to lose money without pain, no matter how much better off they may seem to be to the borrower. The differences in circumstances of the BIL and my family are not really all that great - remember the $1M+ in equity - and they are completely attributable to choices about employment, spending, and saving. Both DH and the BIL had equal starting gifts from their parents, equal educations, etc. The BIL, in fact, had more help from the parents because he kept asking, and even more good fortune in terms of real estate inflating than we did. </p>
<p>3togo and others who suggested attaching the inheritance - the parents are dead, and have been for a while, but the estate is tied up in some controversy (other family members besides those in this thread!) and in another country, as well. So I don’t see any way to use this to secure a loan.</p>
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<p>…you become the go-to person for anyone in the family who needs a loan.</p>
<p>We’ve been in your shoes on about 6-7 occasions and its no fun. The last time it was H’s brother who asked for a loan and he did have to sign a repayment agreement with interest, payable within one year. Will he pay it off in a couple of months? Probably not. H is a bit of a soft touch when it comes to these things. I lent $$ to the widower of a dear college friend (he said he had medical expenses from her illness) and was more than happy to help him out with 2 kids in private colleges and one about to go to college, but I found out that he’d been living “lifestyles of the rich and famous” with a new babe, helicopter skiing, the works! I am SO frosted and know I’ll never see that money again. Good advice on this thread when they say not to expect to see a penny returned.</p>
<p>dke, sorry that you had that negative experience with a widower when you tried to be kind. My mother became widowed at in her late fifties. She told me that that was when she learned who her true friends were. One couple offered money if she needed it (I am sure they would have lent and perhaps even gifted thousands). My mother did not need financial assistance, but they did not know that. She has never forgotten their offer to help and she still talks about it to this day. Other couples dropped her friendship very quickly. People who she went out with as a couple no longer asked her to join them. She never expected them to pay for her, but only to be asked. She had to find a whole new social network once she became single. That adjustment took many years for her.</p>
<p>Thanks, Northeast. This dodo-bird was married to a dear college friend who died at 49 of kidney cancer, very quickly, and I wanted to help in any way I could. She was the BEST. As far as your mother’s experience, although mine was widowed at 66, she had a similar experience with knowing who her true friends were. Really is food for thought.</p>
<p>Twice H and I borrowed $ from family members. Mom lent us $5000 while we were in grad school. We lived incredibly frugally–but we had kids at the time, multiple part-time jobs, and still seemed to be about $100 short every month–little things like a car repair, etc. would throw off our budget. Mom offered us the $ so we wouldn’t be “on the edge” every month, and we paid her back right after graduation when we sold our house (for $44,000!)–we’d rehabbed and made a bit of $ on it. My parents also loaned money (with contracts and interest charged) for college to my siblings. Everyone paid back. Another time I borrowed $18,000 from my sister to make a down payment on a house. Again, interest was charged, there was a contract, and we paid her back ASAP. It does work with some families–but you have to know your relatives and their attitudes toward $. (My H is horrified that you could make a contract and charge interest–cheaper than bank–to relatives–but this is how my family does it. His parents just gave away what little they had to H’s no good sibs who never even thought of paying back. …)</p>
<p>I wouldn’t want to loan $ to this BIL. If you feel you MUST (it is your H’s brother and his decision. . .) I would make a contract that you will receive BIL’s portion of the pending inheritance in the amount that you give him now to “rescue him from his impending disaster.” (I’ve noticed that certain people just go from disaster to disaster.
Frugal people don’t have that problem).</p>
<p>I disagree about it being OP’s H’s decision…it is a family decision, and both should have veto power.</p>
<p>No. Never. Never mix friends/family and business. If you do choose to do it, get everything in writing including a payment plan and put a lien on something. If he doesn’t pay, send it to collections. It’s not personal, it’s just business.</p>
<p>dke, That is truly awful. I am sorry that you lost your friend at such a young age.</p>
<p>atomom, I would be happy to lend money, to different relatives, in the circumstances you describe. A certain young couple, who are closer to us than the BIL, and for whom we feel more responsibility, do everything right but will be vulnerable if one of them loses a job, and clearly this can happen to anyone these days. We did, in fact, offer to help them out at one point when finances were very tight, and they refused - the comment was that they had chosen to have the children, that they were perfectly happy living without any extras for the time being, and that they would, of course, let us know if they were in real trouble. There are other relatives on my side of the family who would ask for money only reluctantly and would pay it back if at all possible, and as quickly as possible. I would feel no qualms about helping any of these people, even if it did mean that we would have less money for retirement. </p>
<p>You are right, atomom, about the BIL - he has lurched from disaster to disaster his entire adult life. When the economy started to fail, I mentioned to my husband that I expected the BIL to be the first to get into trouble.</p>
<p>I am bringing this thread back us (thank you to several posters in my thread on a similar topic for bringing this thread to my attention) to see if the OP might have an update to report…</p>
<p>I thought I’d post a quick update on our situation. We are going to lend money to the BIL, but it will be done through Virgin Money (a lifesaver, thank you so much, esobay, for letting us all know about it). We are talking about the amount right now. We are willing to lend enough to cover the “pressing” bill (about $25k) and possibly enough to cover the renovation (about $10k) - the renovation to subdivide his place is actually a much better idea than we’d originally thought. It will be rent out as commercial space, so there are not the issues with a residential tenant. The BIL’s proposal was that we lend $50k - I nearly gagged when DH told me this, and I said that we are not a credit consolidator! DH agreed that this was unreasonable. </p>
<p>We have all the details now on BIL’s financial situation, and the finances of staying in his current home, for now, make a lot more sense than I’d originally thought. I don’t want to give details here.</p>
<p>We did tell him that we would be drawing on a HELOC for the money, and that we would pass on our interest to him. But it occurs to me now that we are going to have to pay income taxes on the interest he pays us (if he does repay, of course). And I don’t think we get any tax deduction for paying interest - the AMT takes care of that. So I’m thinking of charging him a higher rate to cover the taxes. Our rate is also linked to the prime rate, so I may try to set up a variable rate for him. </p>
<p>We were worried that our HELOC might be reduced or shut down if we tapped it. I did have a credit card cancelled last week. We got a letter that the account had been closed because we hadn’t used it in 2 years. We have a very high credit rating, but from what I hear credit is being pulled from everyone these days. I called today to find out what our HELOC interest rate is, and it is lower than I thought - 3.75%, prime plus 0.5%. The woman on the phone asked whether we were going to use it, and I said that we were. She offered to increase the limit and said it could be done over the phone! The limit is $200k, and this is our only mortgage, so I guess they consider it a good risk. </p>
<p>What would be a reasonable interest rate to charge? Our tax rate is over 40%; we are in the highest bracket, pay a high state income tax, and a tax to NYC as well because DH works there. We also lose all our deductions and have to pay a whopping additional amount every year because of the AMT.</p>
<p>BIL is pressing us for $$; his “pressing” bill is due at the end of the year. I am irritated at having to spend time on this at this point, when I am snowed under with work, preparations for Christmas, and other assorted things.</p>
<p>Oh, and I am going to try to set up the loan so that he is required to pay us at the earliest of the following three time points: (1) he gets his inheritance; (2) he sells his home; (3) some period of time - maybe 2 or 3 years?</p>
<p>And we have given him information on a credit counseling agency near him and on peer-to-peer lending. He has said that he will look into these. I am thinking that we will lend him the $25k he needs now, and then DH will go with him to the credit counseling agency and see what else makes sense. Maybe they can help him find another way to get $$ for the renovation (as well as help him analyze whether it makes sense - it seems to me a no-brainer, but better that an expert looks at it), and another way to consolidate his credit card debt - several cards, one at a horribly high interest rate that should be illegal. Maybe he can get renovation $$ through peer-to-peer lending, although I am worried that his credit rating might be too low. </p>
<p>I should say that I would be responding very differently if it were almost anyone else. We have other family members who may well run into difficulty in these times - very responsible people who are not in a position to survive a job loss or other major setback. I would be more than happy to help them - in fact, I’d be furious if they didn’t ask us. But I knew the minute the economy started to melt down that BIL would be approaching us - I said as much to my husband. He has been living on the edge forever, relying on his parents for bailouts. I knew he would come to BH now that the parents are gone. </p>
<p>Part of my reluctance to lend to BIL, even with the safeguards that we are trying to put on the loan, is that it will make it much harder for us to help anyone else who needs it.</p>
<p>How does Virgin Money work, worriedmom? I looked at the site (in preparation for the request for $$ from my BIL) but dont quite follow. Can they apply to get a loan from some unidentified third party or do YOU (or in our case, we) have to be the ones to fund it? My BIL already got his inheritance, which we is quickly draining, so I dont see the likelihood of “found money” to pay us back. His has been a lifelong pattern of poor money management so he’d be a bad risk for any “loan”, IMO. Sorry to get off topic, but since we are living parallel lives with this issue, I wnat to uinderstand the virgin money thing.</p>
<p>Make sure that his property is zoned for whatever commercial use he plans on it.</p>
<p>Reading your update reminds me of the Detroit automakers and New York banks negotiating bailout arrangements.</p>
<p>I just got off the phone with Virgin Money. I spoke to an extremely knowledgable and pleasant young man who helped me sort through all the issues. Their two basic services are called “Handshake” and “Handshake Plus” - $99 and $199. Basically they do all the loan paperwork for you and, for the higher level of service, service the loan - collect monthly payments, call if payment is late, etc. I think that we are going to do a secured loan, which will cost us (or rather BIL) $649, $549 if we get it done before the end of 2008. The advantages of doing the loan as a mortgage are that if something were to happen to BIL, it is much easier to get our money back and, for him, his interest payments will be tax deductible. The mortgage is written based on BIL’s information - that he owns the place, amounts of existing mortgages, etc. They will do a full title search if you ask for it, but it costs a lot. There is also a tax for mortgage recording, depending on the municipality. The costs will be added to the principal. We will set this up as a lump sum payment, rather than a monthly payment. The man recommended setting up a loan term that is longer than you expect it to last, with a demand clause. The demand clause states that after a certain period of time (or immediately), the loan can be called with XX days notice. This is what we will use if the inheritance comes in or the home is sold. </p>
<p>I am very impressed with Virgin Money, so far.</p>
<p>jym, they do not provide any funds for loans, as far as I know. They function as middlemen between an existing borrower-lender pair. Without them, we’d be going to a lawyer at much higher cost.</p>
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<p>But then you’ll be able to see exactly what other creditors have claims to the house…</p>
<p>worriedmom-
Is virgin money just a sort of broker to set up the loan between the lender and borrower, or can my BIL get money through them from someone ELSE (anonymous) willing to lend money. I really do not see my BIL as a good credit risk and dont want to lend him $$, but would love for someone else to pony up and do so, if someone thinks hes a good credit risk.</p>
<p>Check with your tax accountant about the potential income tax impacts of your actions. The impact will vary based on your particular situation, but call them and let them advise you (DH does this for long time clients at no cost if it’s not overly complicated). They may be able to help with setting up loan schedules, etc.
I would have your the person receiving the loan pay for that title search, you want to know who else has loans tied to the property–no ugly surprizes.</p>