Fortunately he is not such a good friend and the loan was brokered through a mutually good friend. So I now have a contract with some pretty steep terms and a some co-signers. So I am in good shape legally. I might loose a not so good friend, but I will gain some good experience, and with the contract I will eventually get my money back.

I have one friend who I felt very resentful toward until she acknowledged the debt, and since that time, we’ve been able to come to a barter deal for the repayment…I hope now we are both good with the situation.

And I have one ‘friend’ who is always verbal in her resentment of my monetary ‘good fortune’ not taking into consideration that I practice ‘good husbandry’ of my funds. Needless to say, I NEVER loan her any money!

Parents are a bit different because a lot depends on the relationship. Most parents want what is best for their kids, but if a grown-up kid is irresponsible, it’s a different story. Also even if the relationship is close and parents tell you they can wait, you need to consider their financial situation. I lend and sometimes give my parents money interest-free whenever they need it; my parents do the same. Sometimes, I just offer to buy stuff for my parents: they have always been (very) frugal, but having come to the US in their 40s and with almost no knowledge of English, they hadn’t had enough time to save as much as I had. When I was young, they just gave me the money when I needed it; they allowed me to live with them rent-free when I was an undergrad, they bought me a (used but good) car after I got out of grad school and started working. So now, it is my turn to help if or when necessary. I also expect to take care of them when they can’t take care of themselves. If I had been in debt, my parents would want me to pay other debts first, would probably insist on it. At the same time, I’d want to return the money back to my parents first too. But then I grew up in another country and we are much closer to our parents than many Americans. At least my generation.

“I also have 0% interest from my Mom, and I have long paid off all other debts, plus have much more cash than what I owe her but I will keep paying minimum ($100/month) on what I owe her. I have always paid according to our original agreement, so why should I feel bad?”
Maybe because you love her and want what is the best for your mom? Or is this too strange a concept?

@Jen

Why is it hard for you? Your Mother loves you all, does it really matter that she is supporting your siblings financially?

Do you think she loves the younger two more? This problem is not about money but about your relationship with you Mother.

My mother has 5 children. Three older (39 to 35), and 2 younger (20 and 21). She has funded the youngest 2 (different father) each with a HUGE college fund. I am much older than them, and have large student loan debts. Though I am an adult, I am still her child. I find it extremely unfair that 2 of my siblings have this opportunity, while I am saddled with debt.

Additionally, she has purchased houses (in her name) that my other 2 siblings live in rent and mortgage free. One of these 2 is 100%, fully supported by her, and hasn’t worked in years. The other tries to be self-sufficient at least, but as a single mother to 4 children working in a very low income job, it’s not possible. So my mother is constantly bailing her out and has gifted her much more than the rent free house.

In the past I have borrowed from her, and ALWAYS repaid her, which she accepted. There was one time she gifted me with money to move to a new city, until I could get established. Though I am grateful for that opportunity, it is a pittance compared to what she has done for every other sibling I have.

It’s really hard for me! My friends who know the situation always say, “You should feel honored because she knows you’re ok and can take care of yourself.” WHAT? Let’s just say that “honored” is not how I feel in the least! Now if she ever pays off my student loans, then I would feel equally favored.

I’ve seen a lot of family ties strained or broken because one child was favored with loans or gifts when the others weren’t, or one child is asked to help out an elderly parent who is still owed money by another child, or there’s an informal “loan” still outstanding when the parent dies and it complicates (emotionally) the division of the estate.

The kind of resentment these things can cause sometimes last for years and never really heal. All good reasons to pay back personal loans as quickly as possible.

Personally I’d pay back mom first too.

They were great and never mentioned it, but as soon as our house was done and converted to a regular mortgage, we got a HELOC to pay them back. I always felt like I would feel funny telling them about going out to dinner, or taking a vacation if we still owed them money. It was a huge relief to pay it off. I’d pay off any personal loan as quickly as possible.

Ask yourself this: do you want someone thinking about YOU the way we think about this guy?

It was an expensive lesson for us. “Neither a borrower nor a lender be.”

My mom loans money to her kids all the time, and it is great. We always sign a promissory note, pay iterest, have a minimum payment amount, and give her postdated cheques (for a long term loan, one year’s worth of postdated cheques at a time). I have no doubt that if one of us defaulted and there wasn’t a really compelling reason why she should be compassionate, she would, in a very business like manner, sue us or do whatever to legally collect on the debt (I’m sure she would give us more leeway than a regular bank, but eventually she would deal with it). On the other hand, she recently reduced the interest amount on my loan because she loaned some money to my brother, and he got a lower interest rate than I had agreed to, and she wanted to be fair. She also had a GIC mature recently, and she offered to loan it to me to pay off my student loans, but I told her our company had recently taken a loan and if she wanted, she could loan it to repay that and we would pay her the same interest rate we had been paying the bank. She agreed to that, but she will not take the bank rate — she is just making it prime plus one because that is more than she would get otherwise. I always offer to pay an interest rate equivalent to any other loan, but she always sets it up a bit less. I think this works well in our family because we all see this as a reasonable and fair transaction. Also, my mom doesn’t make any judgements about our spending as long as we are adhering to the terms of our loan. Well, she’s our mom, so she says things like get out of debt, but she would say that anyway.

One thing — if you are paying back a loan, make sure you document your payments and provide copies to your lender (unless they are tracking it themselves, as my mom does). I think it is better to pay a bit at a time, but it is awfully easy to lose track, and if they did you the favour of a no or low interest loan, you can take responsibility for making statements:

Loan: $1000
Mar 5/09 -$50 950
Apr 5/09 -$50 900

Doesn’t have to be fancy, but keep track.

The next thing in your list will be “10K to get into the stock market now while it’s at record lows”.

The bottom line is that there is always some good reason you can rationalize to spend money (yours or someone else’s). The problem is that you are borrowing, and it’s likely killing your cashflow. What it also is likely doing is creating the potential of a strained relationship with your parents/family. You are adding in the potential of alienating yourself from your family when by your own admission you can afford to do without hitting up the parental bank.

For your car example, why didn’t you just buy a used car for $12K? Or for your down payment, you still have till the end of this year to make it … and you could buy in December.

Of course, I don’t think that incurring debt makes much financial sense at all … and I (and my family) are learning that lesson the hard way — in living in fear of a layoff, not being able to choose our destiny in life, and so on. We are making strides at getting out of debt hell, but if we could turn the clock back, we’d not do it the same way again.

Paying a family member’s loan last doesn’t mean paying off all your other debts first, it means paying it with what’s left each month after paying your other monthly obligations, but before paying for “wants.”. “Reasonable and affordable” is a phrase that comes to mind.