patrick.net

bulletdodger says

he’s the guy that took a week out of his life to fly cross country, help me load the truck, drive the 3k mile trip back to CA, then helped me unload. As friends go, he’s as good as it gets.
I can’t afford to look at this as a gift. Maybe I should take possession of the most valuable half of his guitar collection, one hot rod, one motorcycle, and one of his two dogs. That should be worth more than 10K to him.

This is surely the kind of friend that you should help if you can. But you did hit on a great idea. He has collateral. It seems from your post that this is intended to be a short term loan, so he should have no problem letting you take short term possession of whatever the two of you decide is appropriate security. And of course, use a written contract. As others have written, only loan money you are prepared to lose. Even if your friend sincerely has all intention of repaying the loan, sometimes stuff happens. Worst case, you have the security and/or you can deduct as a loss on your taxes.

Just so you know, not everyone who loans money to friends/family loses it.
My (now elderly) parents have loaned money to each of my siblings and myself on occassions over the years. There was always a written contract. Interest was always charged at a rate that was a good deal for both parties. To my knowledge, the loans were always paid back in full. I don't know the details of any of my siblings loans as it is none of my business.
OTOH, I expect that any money I loan to my adult child is a gift. It never gets paid back.

Try suggesting your friend use prosper.com or some other p2p lending site to do the loan. First off, this would STILL allow you and his dad to plunk significant change down as a loan - and it would BE a loan, with the incumbent risks and so on, but the peer lending site would handle all of the things you wouldn't want to handle, such as collection agencies and whatnot. Also, perhaps this friend of yours could get funding from a marketplace of willing lenders instead of loved ones. And if his credit is good, the rate he can get would be far more competitive than the credit card debt. If not, he could still do the old switcheroo with a home equity loan later, if that is in fact a real option and not just fantasy.

iirc, there is a p2p lending site that facilitates loans ONLY between members who consent beforehand, i.e., it's not a marketplace, just a loan management company basically. So there's that option. Sry, can't remember what it's called, but I'm sure you can find it on google.

That's shabby treatment of a friend to suggest a p2p website. It says, "I don't trust you to pay me back." It's like sicking a loan shark on your friend.

Hes in a catch 22 of sorts. He's in debt like most borrowers up to his nose. 25k credit card oh my!
True he will reduce his monthly payments. Lengthening the time of his demise with a 30 year note. Interest is front loaded. There are a lot of factors of course. I am sure his lender has considered all of them. Exhorbitant interest is gouging people, to me anyway. There are questions in this. However. I would walk away. 2 years re-established. In the meantime he could find a deal on rentals or something. He's trying to do the right thing of course. However is the interest these "lenders" have him hooked into the right thing.

More things to consider is his employer connected to credit scores in any way. Insurance etc. That gives you a clue as to who owns those concerns. Some would say that is not a good thing to do walking away from the debt. Just don't borrow again that's all.

Hes trying to consolidate. Bring his payments down. Be carefull of ez-money. The whole thing makes you wonder what he was using that credit card for. You can live simply and save then get what you want. Your more apt to look for a better deal with your own money. Since it was so hard earned. EZ-money you don't consider so well. Then trying to struggle paying it back with hard earned money.

Philistine, I suppose you might be right about p2p being an insult, but it's hardly a loan shark operation. But more to the point, loaning 10k to a friend IS essentially a gift, because you don't really have a good way of asking for that money back, and asking for interest on top is not typically done. There's all sorts of bad protocol going on here with regard to friendship, and the friend is just as much at fault asking for a 25k loan as the other guy would be requesting the loan go through p2p.

Neither a borrower nor a lender be! Clearly, if you want to refi, and you have 25k in credit card debt, the responsible thing is to pay that off FIRST before entertaining the refi ideas. Clearly some tough love is required, and as a friend you can either say "NO LOAN" or "yes, but with conditions, you crazy, credit-card-chargin' idiot."

Big Paulie and the mob have better terms as far as I can see. I guess no one hear bothered to sit down and figure the VIG on a 30 year 200k loan. It's awfull. Much less a 25,000 revolving charge card. An equity line? Holy cow. Might as well sell your goat and your car to pay just part of the interest on that one. The buy now pay later mentality in this country has gone nuts. I don't think that getting a job making 50k requires you to get a house or credit cards. If you did have that kind of job and got a loan. You blew it. Don't do it again.

Rent, save, pay cash. SAVE A WHOLE LOT OF MONEY DOING IT. Forget the big screen and the computer.

Hey why is it up to you or me to keep the big boys going. I do things for myself. Not the community of corporations. Some think that is the common good for some reason. Why make them money? It's not that I hate them. It's not that I am jealous. It's the fact why give mine away to someone else. So I can look like I live big now. Owe everyone. Pretend I am one of them. When I clearly am not. I probably never will be. But OWN everything I have. Owe no one.

That description of what he's trying to borrow up there. Looks like hes going to pay you out of the 25k in equity he's going to be getting. What he could possibly do is roll in the 25k in cc debt into the loan. That should reduce his dti. Forget about borrowing more money. He looks like he's in it up to his neck right now. The pulling out 25k in equity does not make sense then. Unless he is trying to reduce his cc balance from 25k to 15k to qualify for the cash out 6-1 half a dozen the other.

IN FACT the lender should look kinder on REDUCING his payments via debt consolidation VS another cash out. He must have otherwise AAA credit and or more than enough equity.

In short something does not look right to me there - for you buddy. I'd get more information and little more educated. Your friend might need to do the same. I have not addressed the loan. Now I am. The lender is either making more this way. Or he dosen't know. He possibly needs to find him another program to get on. He can reduce the dti by rolling in the cc in the refi. They have much better LTV's on debt consolidations. Than they do cash out refi's.

So another words the lender would call rolling in that 25k in credit card debt onto the principle balance. They would pay off the credit card. A cash out refi. That should solve the problem of having to borrow any money from anyone. Because the dti would be taken off of the new loan for quailfying. Simple as that. Unless put the wrong details up there by mistake

Mr.Fantastic says

MarkInSF says

I think it would crazy to lend money to somebody that has $25K in credit card deb

That’s rich coming from someone who said he’d lend money to someone who defaulted on an $800,000 home (CL).
MarkInSF says

I wouldn’t care in the slightest if they did a “strategic default”.

I resemble that remark!

Like I say I would walk away from that deal unless someone explained to me. Why they could not roll in the credit card balance. On to his new refi loan. Which makes it virtually a cash out. Sounds fishy otherwise. 25k is 25k be it rolling it as a cc debt consolidation into the loan. Or taking cash out. Rolling the cc debt into the loan solves his debt to ratio problem. Call another loan company that should send them all scurrying insist he does so if your going to lend him any money.

Or have him do one of those strategerie default type things. Even a liquored up, hillbilly can tell you not to get that far into debt.

The more I read here, the more I wonder if there is something fishy about the friend's story.

His lender could be making promises just to sell the loan and then give the borrower some kind of BS when it comes to getting that much cash back. Or the friend, who is... let's say... not financially savvy could INTEND to pay off the cc debt with the 25K, but somehow end up not doing that and then not qualifying for the refi. Could you recommend he check with another lender to see if that lender can roll in the CC debt into home loan. That's a lot safer.

Interest was always charged at a rate that was a good deal for both parties.
At this juncture, it may be good to point at that the IRS sets a floor on the minimum interest rate that is charged. Well, you can go lower than that rate, but the you still owe the IRS taxes on phantom income based on the imputed rate. As eHow points out, the one nice part about this law is that it requires you to document the loan with at least some paperwork.

The real question is:

"What could possibly go right?"

Dont lend any money less you have a contract and have calculated the interest rates necessary for you to get a return on your investment in this home. Also, make sure to get a lean/lene/leen/? on the house should he fail to pay you back.

You may need that 10k in the future. If the positions were reversed, would your friend loan you the money, or would he even have that much to lend?
Would he be willing to sell some of his toys to lend you money? I think you already know the answer to that question.

Didn't take long for this to become political:
Entitlemented says

He sounds like a democrat

and personal:
clambo says

I suggest you connect the friend who “needs” your 10K of cash with those posters here who think it’s a good idea. They all can show the strength of their convictions, and you get to keep your money.

and so many other things. But it's been a few days, just curious what you decided.

VAIN wrote:

If you lend money to him, this is what’s gonna happen:
-You give him the money
-He pays the credit card debt
-He tries to refinance the loan value + $25k in equity.
-He gets rejected
-He has no way to pay you back
-He promises to pay you back
-The relationship gets awkward
-You write off your loss
-He buys a new motorcycle

And BULLETDODGER wrote:

Is it just me or do these numbers seem a bit off/very bad?

AT 65k a year, assuming only a minimal health insurance and no 401k contribution his after taxes take home every month is ~4150. If his monthly payment on his house is 3k, he has
1150 for everything else.

====================
If you lend him the money and truly think that he will pay you back, then you are in denial of the obvious reality that awaits you (so eloquently stated above by VAIN and BULLETDODGER). If you lend your immature friend money, you deserve to lose it. Funny how you (the frugal saver) are bailing out him (the lover of debt).

A friend in need should help, but how much is this need really? If the one who receives the money is living in luxury because of his/her friend's gift (especialy when the friend is frugal) something is wrong.

EBGuy says

Interest was always charged at a rate that was a good deal for both parties.
At this juncture, it may be good to point at that the IRS sets a floor on the minimum interest rate that is charged. Well, you can go lower than that rate, but the you still owe the IRS taxes on phantom income based on the imputed rate. As eHow points out, the one nice part about this law is that it requires you to document the loan with at least some paperwork.

I don't know what you mean by "at this juncture..." Our family loans were always documented with a signed contract. Any loan contracts were added to my parents' trust, so that if any of us adult children had an outstanding loan at the time of their death, the balance would be deducted from that person's inheritance. At my parents' age, all their money is in cash, almost no stocks or other investments. As I'm sure you know, CD rates have sucked for years. Anything my parents can get over CD rates is a win for them. Interest is always between CD rate and lowest credit union rate for a vehicle loan. That's a win for me.

I think he already gave his (former) friend the money and now regrets it.