Loans from Friends and Family

One of the most embarrassing and potentially harmful thing we did was to put ourselves in a position where we owed friends and family money. In our case, we borrowed $6,000 from my grandfather to put together with the $1,000 that we saved for a down-payment on a car the we desperately needed as our workplaces had changed and we lived too far away for any type of public transportation. We had started paying my grandfather back (and with substantial amounts) until we hit some hard times financially. He said “pay what you can” and we did a horrible job of keeping up with our payments. Flash forward to a conversation he had with my mother where he told her that we still owed him money and this is at the top of our radar. We thought that we had been really clear with him over the first  few years that money was so incredibly tight and we weren’t doing much with it but paying bills, but it has strained the relationship and evidently was weighing on him as much as us. 

Now, we need to address it directly with him (boy, that’s not going to be fun) and apologize for not making it a priority. And then we need to start making payments – consistently and soon.  We would have started this month, but we had the car repair (extra $400 of expenses) so we are beyond tight. Hopefully April will be a different matter.

We also owe our friends money for their truck that we purchased a few years back. It’s a really old truck (17 years) and we know that our friend charged us more than blue book for it $1,000, but we had another situation where we needed two cars and this was the best answer. We made steady payments until the cancer diagnosis and then the rest of the things (see The Crisis) that caused problems fell into place. So we still owe $250 to them, but we’ve also communicated to them that money is so tight and $250 pays for more than the majority of our food  in a month, so we’ve not been able to make the payments. I think that part of  the reason that we haven’t pushed harder is that we hear from them all the time about the really expensive things they are doing ($800 dancing lessons, just because; $1,500 baby photos; lots of traveling). As my husband and I see our parents once every 1-2 years, we have a hard time when one of them says “we really need the money.” This is incorrect thinking on our part – we know we have this obligation and we really want to be able to pay it and have it behind us. But it makes it hard to have empathy for them. This also brings up a future topic I’ll write about – what happens when the Earnings Gap between families widens.

What has been your experience with family/friend loans?

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3 thoughts on “Loans from Friends and Family

  1. Pingback: Loans from Friends and Family « From the Brink of Bankruptcy

  2. It doesn’t matter how much money someone else makes; if you owe them money, YOU OWE THEM MONEY.

    There have been times in my life when I have borrowed money from my parents and they certainly make more in a year than I do in three years combined. They always say to “pay it back when I can”, but for me, that means I pay SOMETHING every month until it is paid off. Even if I only send them $25 one month because things are tight, I send them the $25 and take it out of the grocery budget. It is important for me for them to know that I am not ignorning the debt I have with them, I just can’t make a “huge to me” payment that month.

    I have a friend I loaned $500 to nine years ago. She never paid it back. I have never said anything to her, but I know she owes it and she knows she owes it. If she ever comes at me with how tough things are, she will not get any sympathy or empathy from me because of it. I also have another friend who bought, on payments, some household furniture from me five years ago. Still waiting on payments.

    Unfortunately, if I ever have another friend who needs help, they will most likely not get it from me because of these experiences. That’s not to say that I will not give someone something as a gift; but I will never loan or expect payment for anything. Right now I have a set of sofas sitting in my garage and someone I know has no living room furniture. I told her the price of the sofas and if she can get the money together before a third party via Craigslist, she can buy them. But if someone beats her to them, I don’t feel bad about it.

    • Hi Katie,

      Thanks for your comment – Your first sentence completely agrees with the last section of my post. I hope you’ll be cheering me on as we work to repay ALL of our obligations.

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