|Dealing with deadbeat friends or
If the loan is to a child, a third factor enters the
picture: responsible parenting.
"Our job as parents, whether our children are
2 years old or 42, is to find a way to help them be the healthiest
people they can be. Does this help them become healthier, or does
it put a Band-Aid on something they need to deal with?" says
Hayden. "I have four children, and my response would be a little
bit different with each."
Don't even think of co-signing a loan, Hayden says.
"I would rather the parents gave the money outright
to the kid than entangle their credit," she says. "I just
worked with a couple, and he has co-signed for two of his sons,
and she's having a fit because they're not making the payments,
which is hurting his credit history because they're late by the
time he hears about it. Co-signing is more dangerous than losing
the money. I would rather have the money gone than have the credit
Now comes the hard part: "How much risk do you want to take?
How important is the money to you? If it's going to make you crazy
for the rest of your life every time you see that person, we have
to figure out a way to deal with it."
Hayden says the best solution is obvious: "I
can't lend you $5; I'll give you $100 and it's a gift." If
you lend the family member money, and circumstances prevent them
from repaying you, a fallback plan would be to take it out in trade:
baby-sitting, yard work, painting projects and the like.
Once it is established that you've got a deadbeat for a relative,
a frank and honest discussion of the situation may spare you years
of bitterness, acrimony that can poison generations to come.
"I think sometimes you let it go dormant for
the sake of the relationship, to hold some semblance of family,"
Hayden says. "Let's assume that they are two brothers and the
parents are very concerned about it. I think there should be a conversation
and say, 'Look, you do owe me the money, and if you ever want to
be really clear with me, you need to pay it back. And, you're my
brother.' You need to name it as a character issue.
"That the relationship has been dinged is absolutely the truth.
That's the part that everyone has to tell themselves the truth on.
There is a character issue here and a trust that will not be there,
and it will hurt. But you can move on and still hold the family
together. Still, a lot of people don't. A lot of families are torn
up over this."
Despite our many modern sources of credit, or perhaps
because of them, the old saying, "he who lends money to a friend
stands to lose both," still holds true today.
Jay MacDonald is a contributing editor
based in Mississippi.