Lending Money to Family – Reader Struggle

December 11, 2009

Lending money to family and friends is no picnic, just ask Brandon. He’s a reader who left the comments below on the post from earlier this year about lending money to family.

“My wife’s family does not have much care when it comes to money. they don’t make very much, have horrible credit, and their kids are following suit. My brother-in-law borrowed my car to drive to Salt Lake City and fell asleep totalling the car (but walked away). I only had liability on it so I was out $1500 which he said he would pay back. 3 years later- not a dime.”

Fortunately for my wife and I, our siblings and parents are good with their finances so we’ve never had to worry about whether we should lend money to them or not.  I can see how your first instinct is to help out a family member in need, but things can get messy.  Brandon goes on in the comments to share more details.

“My mother-in-law got behind on her mortgage and asked if I could lend her the $1k for two weeks till her next payday. that time all went well- no worries. then the next month the same thing and the next month. then she’d only have some of the money to pay back or one month none at all. She owed us $2500 (which is a lot for us i’m only 28).


Then she never borrowed anything for a year or so. Then the same thing again, with the guilt trip saying she can’t miss another payment or they’ll forclose. So I lend her the $1k which doesn’t get repaid. It’s now Christmas time so there is no chance of her having extra money to pay me back for who knows how long.”

This next part seems to be the real kicker, the thing that would probably get under anyone’s skin. Borrowing money and then not spending it wisely.

“I feel they just think we’re an ATM for them. The biggest problem I guess I have is that they don’t change the’re lifestyle to try and pay me back. My wife and I have 2 kids and a very modest house, no internet (i’m at work =D) a small tv with the cheapest cable package. Yet my in-laws have internet, x-tra movie packages and go out to eat more than us. I’m a very quiet person who like making people happy so I don’t wan’t to drive a wedge between us (that would kill my wife- her family is everything). What in the world can I do???”

I don’t have a good answer for Brandon since I’ve never been in that situation before.  I’m hoping one of you will have some tips and advice to share with him about lending money to family. If so, please share it in the comment section below.


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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11 Responses to Lending Money to Family – Reader Struggle

  • Rena

    If they have all the extras, and he doesn’t he should tell them that he cant afford it…the proof is the way he is living. he could even complain every time he sees them how expensive everything is and how he can barely put the roof over their heads and how little (why only $100) per week that they have for food. He has the proof, no cable, no bit screen tv….

  • Sandy L

    One solution that has worked is to have the family member “earn” the money.

    A girlfriend of mine has had to rely on family/friends over the years because of a disability. She hates handouts, but sometimes has needed them. Now, she babysits, cleans houses, does yardwork, house sits, dog walks, runs errands. It’s a win/win. It helps the family/friends, the money is earned with dignity, and it has expanded into a business that she can do with despite her limitations.

    When my mom still had apartments, I had to raise the rent for a long time tenant who was paying only $400/month. I only raised it $50 and when she complained, I told her that I would keep it the same if she agreed to shovel the driveway and sidewalks. She said she had a bad back and could not do it.

    Don’t know if this family is closeby or not, but there has to be something the family needs help with, even remotely. If they reject an offer to earn the money and just want a handout, then I can’t see how the man’s wife would side with her extended family. If she’s willing to help them financially, they should be willing to help her in return. If it’s a one way giving relationship then the wife needs to justify how it’s okay to give to them at the expense of her immediate family’s welfare.

    Lastly, I’ve used guilt. My mom didn’t care about the money she was sending to my dad to keep him away. She literally gave every extra penny. I finally said, “Do you care more about him than your own child?” This was cruel but effective.

  • Karen

    We had the same situation in my husband’s family. His one brother was continually asking other family members for loans and never paying them back. We heard about it from my other brother-in-law repeatedly and my husband and I talked about it. We decided that if they came to us for money, we would simply say “No, we will not lend you money.” They only asked us one time – our refusal must have been an effective hint. I’m sure they have asked other family members since but they have left us alone.

    You are enabling your in-laws to continue to be financially irresponsible. It is not your job to bail them out so STOP! Do them a favor and let them figure it out for themselves.

    Good luck!

  • Jan

    I have similar situation / I live very frugally and everyone always wants my cash. I came to the realization they do not care to help if I am down on my luck and I have done everything skipping eatting etc to stay on my budget. So if they are unwilling to do without then tough love is just that it is tough love.
    I have started stating this ” I am so very sorry but I just can’t at this time” not one other word of explanation as to why. You see I am saving for my retirement and they all know that and they have spent it three times over on crap that they need to do without. Take for example one of them smokes like a frieght train and drinks then does not have money for rent. (gee you think there might be some bad decisions here?) Stop being the ATM recite this line two thousand times to yourself if you have to ” I am sorry at this time I simply CAN NOT ” It is not hurtful does not get into any other issues it is the right answer !

  • zud

    i’d loan them whatever amount they are able to pay back. if you loan then 1K and she has only paid you back 250, then when she asks again only loan 250. this way you are still loaning but staying within a range, say 1K.

    rather than remind them of the 1K they owe you since it seems daunting, say you’ll take whatever they can give you, ie 100$. you can then loan them back this 100$ but that’s it until they pay back more.

    i don’t recommend gifting the money unless you can really really do it without resent and it sounds like this might be challenging.

    you also need to get your wife on board. with credit cards ppl don’t get hit where it hurts anymore. but your wife has to realize what the consequences are when the well is dry, ie no food, missed mortgage payment, she can’t get her hair done etc.. don’t let her lean on credit b/c you’re short money. don’t co-sign any loans for her family!!

  • George

    Lending family money is not something that “helps” them. It’s something that hurts them. Look at http://en.wikipedia.org/wiki/Enabling for more info.

    If you have the money and want to give it as a GIFT, then do so. If not, then a simple “I’m sorry, but we don’t have the money to give you, and I don’t want to ruin our relationship by turning a loving family relationship into a business transaction” will suffice.

    When people can’t manage their money, lending them money just gives them more money to mismanage – it doesn’t help them in any way (despite their cries to the contrary).

    The only time I’ll lend money to friends or family is if it’s a very small amount (under $10) – i.e. “I’ll buy you lunch today, if you want to return the favour sometime that’d be great”. It’s a “loan” in one sense, but I don’t have any expectation that the money will be repaid – it’s essentially a gift. If a family member asks me for a loan, I would respectfully and lovingly decline – if anything, for the sake of the relationship.

  • Richard

    Stop lending them money! Look, all you’re doing is enabling your wife’s family to continue making poor financial decisions, and they’re learning nothing as a result, except that they can walk all over you. Believe me, I understand the importance of family, but your family comes first (your wife and kids). If you continue with this pattern of shelling out money to your extended family, your immediate family is going to start suffering, if it hasn’t already.

    Doing business with family, in my opinion, is never a good idea. Being charitable, however, is something completely different. When you give money to family members, do just that, give it. And don’t expect to get it back. I would start right now by forgiving all your mother-in-law’s debts because you probably won’t ever see that money again anyway.

    The next time a family member asks you for money, if you are absolutely unable to say no, you should 1) give it, not loan it, and 2) give it with a condition. For instance, say that you’re willing to gift them this money with the condition that they will sit down with you and write a budget. No budget, no money.

    This is a rough spot you’re in, Brandon, no doubt. But you have to put your foot down, so to speak, for yourself and your own family. It’s the right thing to do, and it’s the only way anything will ever change for the better.


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