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Lending to people you know

  1. Aug 19, 2009 #1

    Pengwuino

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    So a few days/weeks/whenever ago, Obama gave out those medals of freedom and one of them went to that guy who started the concept of "macrolending" in Africa where people were loaned $250 or so and had something like a 99% success rate. Whatever. It made me think though. It's so weird that such a program, private people giving small loans to strangers resulted in such a high return rate... yet it's almost unanimous with people I know that "you don't lend money to friends/family".

    Maybe it's just me and the people I know but unless it's someone you REALLY know, it's almost a no-brainer to not volunteer a loan (or if you do, basically say goodbye to that money). Even with family, it's an iffy situation. Why is this?

    Maybe it's a logical fallacy but something just doesn't seem right. People are off giving strangers loans to great success, yet it seems fairly universal that people are either uneasy or completely against giving money to friends/family.

    DISCUSS!!
     
  2. jcsd
  3. Aug 19, 2009 #2
    I think it is hard to bring family/friends into formal work of signing agreements etc.
     
  4. Aug 19, 2009 #3
    It sucks I had to learn this the hard way. My brother whom I loaned gazillions doesn't seem to care to pay me back. What's worse, a week ago he bought pants for $180, and calls me to loan him additional five grand for a medical procedure in which he appeals to emotion that we have to help each other in times of need.
     
  5. Aug 19, 2009 #4

    lisab

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    The man you're referring to is http://en.wikipedia.org/wiki/Muhammad_Yunus" [Broken], who also won the Nobel Prize for developing this idea of microlending.

    Now, there are organizations http://www.kiva.org/" [Broken] that allow anyone to become a microlender...you never meet the person you lend to.

    And perhaps that's why it works...if you stiff a family member for money, they will likely (eventually) forgive and forget.

    But taking money from a stranger, given to you freely with nothing but good will and your word to pay it back...well, it doesn't have that sort of built-in forgiveness cushion.

    Also, with family there may well be feelings of entitlement.
     
    Last edited by a moderator: May 4, 2017
  6. Aug 19, 2009 #5

    Pengwuino

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    That seems like an argument for why people would be more willing to lend to their family and friends though.
     
  7. Aug 19, 2009 #6

    lisab

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    :confused: Hmm...I don't see it. Perhaps what I wrote would make an unethical person want to *borrow* from a family member. But why would it make someone more willing to *give* your money to someone who feels entitled to it, simply because of shared genes?
     
  8. Aug 19, 2009 #7

    turbo

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    A loan should either be casual and trivial or structured and impersonal. Loaning money to friends and family is a really good way to wreck the dynamics in your personal life. When people are in debt to you they will start acting differently to you (even if it's only mild defensiveness) and if they don't pay you back while you see them spending money on things that they want (as opposed to need) while delaying repayment, that will make you feel differently about them.

    For years, I was pretty supportive of a musician that was talented, if troubled. I sold him guitars that I way under-priced for him and always bought them back at the same price if he needed cash (of course!) as his fortunes waned and ebbed. Then I found that I was not getting the instruments back on first-refusal (our agreement) and that they were being converted to nose-candy. Real bummer!! I thought that my risk was mitigated by a personal agreement. Nope!

    I might still be friendly with the guy (on some level) if he had not screwed me. I made it very clear to him that each way-below-retail-price instrument that I sold him was a loan to be paid back via his reselling the instrument to me or paying the difference. I put him on the road with some fantastic 6-strings and 12-strings at bargain prices. One sweet Gibson B-12 was destroyed when a girlfriend broke up with him at a party and he smashed it on the rocks and fed it to a campfire.
     
  9. Aug 19, 2009 #8

    Pengwuino

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    oops i missed a key word and misunderstood. I thought you meant from the lenders perspective. I'm really more talking about you being the person who shells out the cash.

    I'm thinking its probably from the fact that if you get stiffed from a stranger... oh well, it happens. If you get stiffed by a friend/family member though, you have to see them, they're part of your family, etc etc... and they aren't forgetable like the stranger would be.
     
  10. Aug 19, 2009 #9

    Evo

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    NO! waht, NO!!

    He has been leeching off of you forever.

    NO!

    If you can't do it, give me his number and after he talks to me he will never ask you for anything ever again. :devil:
     
  11. Aug 19, 2009 #10

    Moonbear

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    This is exactly why it doesn't work to lend money to friends and family. If they don't pay you back, and you break their knee caps, they're going to turn right around and ask for a loan to pay for the hospital bill, because you're their friend or family.
     
  12. Aug 19, 2009 #11
    Glad I could count on the PF buddy system. He will just love to hear about your bank account.
     
  13. Aug 19, 2009 #12
    https://www.youtube.com/watch?v=eKgPY1adc0A
     
  14. Aug 19, 2009 #13

    russ_watters

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    Hell, I want waht's number!
     
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