loan of 60k to friend to buy apartment

liam bourke

Registered User
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I have a friend that is looking for a loan of 60,000euro.
She is looking to buy an apartment in Carlow town as she is self employed and the bank won't give her a loan.she has about 18,000 euro in savings.
Her current rent at the moment is 550 per month.
She is looking to pay me back 500 per month over a 10 year period which would amount to 60,000 after 10 years.
The bank won't give her a loan as she is self employed and her annual salary is approximately 25,000 per annum
Any advise please would be great.
I presume we would have to go to a solicitor to get this in writing?
 
Simple advise from me would be, Dont mix friendship and money
I have heard more negitive stories about these loans then postive
I also see from your post that she isn't paying any interest
 
Going to a solicitor doesn't give you any protection in the case of default. Lending to "friends" is a disaster in my experience. Yours will always be the lowest priority repayment as there is no interest and no recourse. A lot can change in ten years. If the bank assess her as a bad risk then so should you.
 
Would you go guarantor for her with a bank? That way if she lets the bank down, she lets you down as well. Think about it. Cervelo has given you very good advice, heed it.

Then again, you could always buy the place yourself and rent it to her.
 
Don't do it, it will not work out, I recall reading somewhere that 7 years was the average time people spent in their first home, an apartment might be less, in my case we moved at 5 years, things change over the years and when they do you can kiss your cash goodbye, I guess you could buy the apartment in joint names with some legally approved understanding about the interest free loan.

To be frank don't touch it, gift her some cash to go with her own and then bank finance the rest in her name if you really feel obligated.
 
Do you have €60,000 that you will be happy to maybe never see again? If the answer is No, then don't get involved.
 
I haven't posted in a while but logged in specifically to tell you not to do it!

This day 10 years ago the Great Recession hadn't even officially started, and look at everything that's happened in between now and then. What happens if our next recession hits inside your 10 year timeline (which is more likely than not) and your friend falls behind on payments? What happens to the real purchasing power of the 60k in between now and then?

This is not a good idea.
 
Like everyone else says, this is a very bad idea. Unless you are very wealthy and can afford to not get 60k paid back.
 
Hi Liam

Not for the first time, I will be taking a dissenting view from this.

There is a risk that could turn sour and it could affect your friendship.
There is also a risk that your friend will not repay the loan.

So, if you are prepared for both, then it's fine to go ahead.

You probably have the cash on deposit at 0.1%. If she were able to get a mortgage, she would probably pay around 4%. So you are saving her a lot of money.

It might be better to charge her ECB +2%. So it's not free money and you are both getting a benefit.

Your solicitor probably should do up a formal mortgage, so that she cannot sell the apartment without repaying you first.

You should do a separate agreement which might contain a clause that if you want your money back, you can give her two years' notice to repay the loan.

An alternative plan would be that you and she would buy the apartment jointly. Though to be honest, this would be very messy.

Brendan
 
You must have some friendship if she felt she could ask you for such a large amount of cash. I personally would not lend to anyone - family or friends. They may be annoyed at first but it would be nothing to the fallout that could occur if things turned sour later on. She's self employed so heaven forbid she got ill or had an accident she'd be out of work and your payments would likely be the last on her list of priorities. What if she died and was in debt to others that you never knew about - again you may not get anything back. Yes I know I see the worst in scenarios but having been through a family fallout which ultimately was about money, I don't see any benefits to you giving €60k interest free when you could be investing it safely for your own future.
 
Like many others you seem to be struggling between head and heart but head must stay clear and rule.
I recently was about to get involved financially in a family (nieces) business. Growing nicely from humble beginnings and needed a little injection to move forward. Discussions were concluded and agreement reached when a difference of opinion arose between the 2 owners.
They have both now gone their seperate ways and luckily we had not finally signed. Lesson learned.
 
LORD POLONIUS:
Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.
 
Yes I would Brendan. Anything over €50 and I wouldn't consider it. I got stung before helping a friend out.
Like Sirmillie my father always told us never a borrower nor a lender be. I should have heeded his advice.
 
Guys - would you give the same advice if it were €6,000?
Absolutely. People can have weird ideas about money and you rarely know what they are until you get financially embroiled. I've lent large sums of money to quite a few people -- the outcomes varied from getting regular payments, accounting slips and thank-you notes at one extreme, to the person quite literally forgetting about the debt at the other extreme. In more than one case the person lied about their financial security in order to get the loan. One of them paid back a loan but it took ten years instead of one. Every single one of these cases was a "friend". Being older and wiser, I'd still do the same in very exceptional circumstances, but even among "friends" there are people who I'd consider and people I wouldn't.
 
Hi Dub

That really is the point.

I have seen quite a few loans given by people to their family members and to their friends.

Some of them were crazy. No one should ever have given that person a loan. They had no intention of paying it back. They were scroungers.

But the vast majority were good loans. They were either desperately needed or just very useful e.g. to help the person get on the housing ladder. And they were good loans in that they were paid back.

So the few bad cases should not stop good people from giving good people good loans.

If the Original Poster is happy that the recipient is not a scrounger and is likely to pay back the loan, if they put it down in writing, and if they take out a formal legal mortgage and if they can afford to write off the loan if it comes to that, then they should go ahead.

On the other hand, if the recipient is "bad with money" or generally unreliable or if the OP would be badly affected by the loss of the money, then they should not give the loan.

Brendan
 
I agree wholeheartedly. I have friends who I'd happily lend any sum to because I know I'd get it back. And I've family members who I wouldn't. It's all about the person.
 
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