Would you co-sign or lend money to a family member?

[Anonymous]

Anonymous wrote:Interesting that you mention that you have a US-based perspective on this. I wonder if other countries have the same issues with credit? Is it as bad for somebody in other countries if they have bad credit?

I am of Korean decent and my parents (1st generation in America) and their friends routinely loaned each other money in a group setting. The purpose of the money ranged from starting a business, purchasing a car, buying a replacement appliance, etc...all large purchases that would require a loan from a bank, which they did not have access to since they had no credit. Your credit was basically your reputation. Now that my parents and their friends are more established and have solid financial footing, the group loan system is not utilized as much, and if it is, it is done socially for everyone to keep in touch, rather than actually needing the money. Informal immigrant systems like this is what binds these friendships together and builds a culture of helping people to create a rising tide to lift all the people in the community. As a second generation American, I still feel an obligation to help complete strangers of Korean decent that are of similar age as my parents. That's not to say that I don't help people of other ethnicities, I very much do, but I almost feel an accountability and extra burden towards older Korean people because I am familiar with the sacrifices and struggles that they experienced.

[Anonymous]

I co-signed for my sister's first new car. She is an adult, with steady job. She had ZERO credit. Growing up my parents only used credit to buy their home, which they promptly paid off very quickly. They scared us away from credit.

A year later my sister refinanced in her own name. She was way ahead on payments, and did more than her part.

I can't say there is anyone else I'd cosign for. Just my kids to get them started, and only when I can trust them to be responsible..

[Anonymous]

I would only do it for an amount I could afford to lose and consider a gift, so not a car, tuition, or home loan. I wouldn’t consider the nature of the relationship so much as the trustworthiness of the person. I’d be just as concerned about losing the relationship over money as I would be about losing the money.

[Anonymous]

I think it depends on the relationship. She could have raised this kid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:GIFT. Not loan.

Never, never, never. A huge lesson learned and we are recovering this year. We loaned to three people - family, employee and friend, years ago. They lived large but had problems returning the money back. We had to really beg to get the money back, and they returned it as if they were doing us a favor. We were lucky because we did not lose out a huge amount. In 10 years we were not given a single cent as interest. We also did not have any paperwork so we did not want to come down very hard.

In the end, the relationships suffered.

I have to add here, that I have given huge gifts of money to my brother to help him out. I have no expectation that it will be returned, even though he sees it as loan.

Any money - loan or gift - has to be of the amount that you do not care if it is lost. It should not expose you to any financial hit - your retirement, college funds, medical, housing.

Ask yourself this question - if you need money today, who will give it to you? My answer is that probably - no one.

If they had it, my parents would give me money. Same with MIL. Probably my siblings.

If they had it to give as gift, your parents, MIL and siblings would give it - as they should.

No one should jeopardize their financial health and loan money to a person who is incapable of returning the money in the present. This is what banks do. You loan based on their income capacity in the future. Obviously, you do not charge any interest. You want to help them to become established and productive.

I have given and will continue to give to siblings, parents and also my children. Each one is a gift and it comes with caveat - I want the money to be used for positive things that can help the family member to progress or create a future income stream. So I will not pay for a vacation, but will pay for college education, medical expenses, repairing a house to rent it, providing a roof over the head, living expenses. I have been given loans by my friends and I have repaid as soon as I was able to.

[Anonymous]

No

[Anonymous]

Absolutely not. I would no co sign a mortgage ever, but I would a lease for my kids definitely not cousins. Depends on relationship with niece or nephew. Co sign means you are on the hook if they don’t pay. 100% you. It could affect your nanny’s ability to get her own house or even a car.

[Anonymous]

I would give money to my siblings but not co-sign or lend.

[Anonymous]

I have lent my sister when I knew she was shortly going to get a bonus and return it. And she did.

DH lent SIL money when she was struggling and I thought she would never return it and she hasn't.

If someone has financial problems it's usually a pattern of behavior so I wouldn't expect the money back.

[Anonymous]

Nope. Been there done that.

[Anonymous]

I gave substantial amounts of money to my parents for my sister after I sold my house. They needed it for her education (she's substantially younger than I am).

I don't regret that at all.

[Anonymous]

Absolutely not under any conditions.
Give them money for necessities? I have many times.
But co-sign? No.

[Anonymous]

I have three siblings. I would consider co-signing or loaning money to two of them with clear terms for payback. I would not loan or co-sign to the third sibling.

[Anonymous]

If I had the money to spare I would do a one time gift. If giving them money meant taking something away from my own home/family/retirement, etc then I could not give that money away.

I would not ever, under any circumstances, co-sign on a loan. You do not bail someone out by going into debt yourself. No way. No how.

[Anonymous]

Depends.