Should I Do This? [borrow from relative to pay off loan]

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redbeard25
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Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 5:25 am

Hey everyone!

Last night a family member made a suggestion on helping me pay off my auto loan. Basically, he offered to loan $15k (cash), I'd pay monthly eliminate the additional $5k allowing me to pay off sooner. I'm reaching out for positive and negative factors to consider here.

Furter details:
-My principal balance is $15000 @ 72mo (52 payments left)
-Interest rate is 12.99% (cannot refinance with capitol one)
-Credit score is low (560)

Negative aspects to consider is the fact paying off this loan will ding my credit score. Would this make it harder to take out additional loans? (not planning on taking any out anytime soon)
Positive:
-Paying sooner will allow me to save $5k in the long run (2-3 years sooner), allowing me to free up $400-$500/month to attack smaller CC debts (total under $4k)
-Not sure about auto insurance, but paying off would allow me to adjust full-coverage status possibly?

What are your thoughts? Should I do this?

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Mountain Doc
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Mountain Doc » Mon Aug 13, 2018 5:49 am

There is no good answer to your question. Most people here, myself included, will warn you against the many pitfalls of borrowing from a family member. It is a dangerous dynamic to bring into family relationships. Sometimes these situations work out well, and sometimes they do not. Are you willing to risk the relationship on this possibility?

If I were in your shoes, I would sell the car, pay off the loan, and buy whatever car I could afford to purchase in cash. It might be a clunker. And cut up the credit cards. Both of these debts are an emergency situation. Dave Ramsey is controversial around here due to questionable investing advice, but from my vantage point you are in a perfect position to go listen to his debt advice.

Best of luck.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Cigarman » Mon Aug 13, 2018 5:56 am

Should you do this, don't change your auto insurance...what happens if you are in an accident and you have dropped your coverage to a point where it doesn't begin to cover the cost of a replacement...oops right back to where you started.

I wouldn't think paying off the loan early would hurt your credit score, it should help it by freeing up credit.

redbeard25
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 6:07 am

You raise a good point and I will say, this obviously was a bad place to put my money...but a mistake I've learned from. The only way I see this relationship going sour is if I don't pay him...and I've been making payment's with no issues. Let's just say the money isn't an issue for him...
If I sell my car I'll only get at least 12k...leaving me with the additional loan to pay off $3-5k or so. Pay off in less than a year.
I go buy a toyota/honda for $2500 but run the risk of well..many things could go wrong as I've experienced in the past.
Just considering options but buying a cheap car is more of a risk imo

redbeard25
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 6:08 am

Cigarman wrote:
Mon Aug 13, 2018 5:56 am
Should you do this, don't change your auto insurance...what happens if you are in an accident and you have dropped your coverage to a point where it doesn't begin to cover the cost of a replacement...oops right back to where you started.

I wouldn't think paying off the loan early would hurt your credit score, it should help it by freeing up credit.
Yeah, nvm about the insurance...valid point as anything could happen.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Jack FFR1846 » Mon Aug 13, 2018 6:16 am

Only seeing the credit score and your interest rate, I think I'd say no. You need to learn how to manage money and properly use credit. You won't do this if relative swoops in and absolves you of part of your debt. Thank the relative but decline, then work to reduce your debts on your own.
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vineviz
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by vineviz » Mon Aug 13, 2018 6:21 am

Mountain Doc wrote:
Mon Aug 13, 2018 5:49 am
If I were in your shoes, I would sell the car, pay off the loan, and buy whatever car I could afford to purchase in cash. It might be a clunker. And cut up the credit cards. Both of these debts are an emergency situation.
This is what I think I’d do too. Keeping a car you can’t afford is a huge financial mistake, and downgrading the car is the best way IMHO to rectify the error of having purchased it to begin with.

Plus a credit score of 560 tells me this might not be the first financial mistake in this story.

Normally I’m VERY leery of bringing family into business relationships, but if OP is determined to take the $15k
I would consider paying the credit card off completely first ESPECIALLY if it’s rate is higher than the auto loan (which I suspect it is).
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by bampf » Mon Aug 13, 2018 6:25 am

I'm sort of in the same situation but the other way around. It is a real stressor on me to see my family members tossing away their money by paying stupid high interest rates or credit card debt. For me, the $15K would be irrelevant in the long run. I would do this to help the other person out with the expectation that I would get it back, but, that wouldn't be the important thing for me. It would be the "Can I accelerate their journey to financial independence by taking care of something that is relatively easy for me?"

If you treat this right, it is a heck of a gift. Take the loan. Pay it off faster to the relative. Don't go buy home theatre systems or trips to mexico before it is paid off.

Treat it like it is meant and you will reap the rewards. Mixing family and finances suck only if you screw it up. Take it seriously and you both win. Mess it up and you run the consequences of annoying the person trying to help you and losing their benevolence. You have all the control here.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by OnTrack2020 » Mon Aug 13, 2018 6:37 am

I am convinced that people who say "sell the car" and buy a clunker for a few thousand dollars have never spent time sitting in a repair shop. If you have lots of time, great; otherwise don't do it, not worth it.

Personally, I would not borrow from a family member, but rather see if I could pick up a small part-time job to throw money at this debt until it is paid off.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Mountain Doc » Mon Aug 13, 2018 6:40 am

OnTrack2020 wrote:
Mon Aug 13, 2018 6:37 am
I am convinced that people who say "sell the car" and buy a clunker for a few thousand dollars have never spent time sitting in a repair shop. If you have lots of time, great; otherwise don't do it, not worth it.
For the record, I drive a 13-year-old car :D

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vineviz
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by vineviz » Mon Aug 13, 2018 6:46 am

OnTrack2020 wrote:
Mon Aug 13, 2018 6:37 am
I am convinced that people who say "sell the car" and buy a clunker for a few thousand dollars have never spent time sitting in a repair shop. If you have lots of time, great; otherwise don't do it, not worth it.
My primary vehicle is a 1994 Honda, though my repair shop is close enough to my house that I walk home when my car is there instead of sitting around waiting for it.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by mouses » Mon Aug 13, 2018 6:49 am

redbeard25 wrote:
Mon Aug 13, 2018 6:07 am
You raise a good point and I will say, this obviously was a bad place to put my money...but a mistake I've learned from. The only way I see this relationship going sour is if I don't pay him...and I've been making payment's with no issues. Let's just say the money isn't an issue for him...
This attitude right away firms up my belief that you shouldn't borrow the money from him. A debt is an obligation and should be paid back. You should not be going into this with the idea that it's okay to stiff your relative.

You got yourself into a bad financial situation by making a number of bad decisions, otherwise your credit score would not be so low. Now you have to live with the consequences, which include being frugal and paying your debts yourself.

Balefire
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Balefire » Mon Aug 13, 2018 7:07 am

I have been in the other shoes (as a lender) several times with family members. Most of the time the outcome is good and they pay me back ...

The scenario is a win for the lendee and a possible win or lose for the lender...

Few tidbits

1) the lender has to treat it like a gift psychologically. If the family member screws up, is unreliable, buys an expensive tv instead of paying you that month just let it go. If the family member misses a payment. Just let it go. When issues like this happen I initially felt annoyed and it hurt my family relationship. .. but now that I treat it like a gift, I consider any payment back as a bonus and even when they miss a payment or three, every thing is fine

2) the lendee has to be committed. If they are, their family member can help them save a bunch of money

Go for it if both parties understand.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by sjt » Mon Aug 13, 2018 7:13 am

Another vote for sell the car and buy a beater. Seriously, from another post - you stated the vehicle in question is a Civic Si. No doubt insurance is expensive on this vehicle and also premium fuel adds up.

When you buy the beater, invest in a jack, jack stands, and some decent wrenches. :happy
"The one who covets is the poorer man, | For he would have that which he never can; | But he who doesn't have and doesn't crave | Is rich, though you may hold him but a knave." - Wife of Bath tale

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by cheese_breath » Mon Aug 13, 2018 8:02 am

I agree with the others who say don't do it. If it was Uncle Fred asking if he should loan you the money I'd advise him not to. Nothing against you personally, but I doubt everyone who doesn't pay loans back to relatives is a deadbeat. But now they have some extra money when something too good to pass up becomes available, and Uncle Fred would understand if you were late on just a few payments. And eventually you stop making the payments at all.

This is a good time to learn from your mistake by experiencing the consequences. Either sell the car as suggested by many or pay off the original loan over time. Don't let Uncle Fred bail you out.
The surest way to know the future is when it becomes the past.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by msk » Mon Aug 13, 2018 8:11 am

Depends. Relative is Mom or Dad? Face up to the reality that you are unable to budget satisfactorily. Decline the loan. Admit your financial weaknesses to Mom and/or Dad and suggest that you would nevertheless welcome a (smaller) simple handout instead. I suspect that you would still not dig yourself out of the mess, but admitting a weakness is a major step in fixing it. If it were my kid, I would smile and say, Finally! and hand over as much as I can afford to fritter away.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by mortfree » Mon Aug 13, 2018 8:23 am

redbeard25 wrote:
Mon Aug 13, 2018 5:25 am
Hey everyone!


-Paying sooner will allow me to save $5k in the long run (2-3 years sooner), allowing me to free up $400-$500/month to attack smaller CC debts (total under $4k)
Am I missing something or are you in regards to freeing up 400-500/month? What is your current monthly car payment?

You still need to pay back the loan from your relative. What is that plan - amount per month and timeframe?

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corn18
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by corn18 » Mon Aug 13, 2018 8:31 am

Why is your credit score 560?

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by ColoRetiredGirl » Mon Aug 13, 2018 9:50 am

vineviz wrote:
Mon Aug 13, 2018 6:21 am
Mountain Doc wrote:
Mon Aug 13, 2018 5:49 am
If I were in your shoes, I would sell the car, pay off the loan, and buy whatever car I could afford to purchase in cash. It might be a clunker. And cut up the credit cards. Both of these debts are an emergency situation.
This is what I think I’d do too. Keeping a car you can’t afford is a huge financial mistake, and downgrading the car is the best way IMHO to rectify the error of having purchased it to begin with.

Plus a credit score of 560 tells me this might not be the first financial mistake in this story.

Normally I’m VERY leery of bringing family into business relationships, but if OP is determined to take the $15k
I would consider paying the credit card off completely first ESPECIALLY if it’s rate is higher than the auto loan (which I suspect it is).
I would get a second job before accepting a loan from a relative. While you can pay him back now, life happens resulting in non payment and showing up on Judge Judy.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Nate79 » Mon Aug 13, 2018 9:55 am

Credit score is the least of your worries. The credit score and interest rate tell the story of poor financial decisions. I agree with the posters to sell the car and buy a cheaper one. You will need to get a small personal loan to pay the difference and buy a beater. I would also recommend Dave Ramsey.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Spirit Rider » Mon Aug 13, 2018 10:08 am

While I agree in principle with the sentiment of selling the car buying a less expensive car. However, the reality is not always that simple. First we need to determine if the OP can even afford to keep the car.

OP, to better answer your situation, we need more information:
  • What is your income and monthly budget? Rent, food, transportation expenses, utilities including cell phone, etc...
  • Especially important, what is your current monthly car payment and insurance payment?
  • What are the family member's loan terms? Interest rate, loan term, monthly payments and their starting date?

redbeard25
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 11:04 am

I've only had line for a couple years, yes I've missed a couple payments. I've paid off a couple, dropped some too. I'm not going to sell my car, I need to follow through with it. I've made EVERY payment, I'm not struggling to pay it is what I'm saying here.

He wants to loan me the money so I avoid interest. Like I said, I'm not struggling to make this payment.
My car payment is $373, auto $187
I would simply pay him the same I would any other loan/credit...the day I get paid.
I would pay him $400/month for 3 years probably some month pay $500 like I have been.

I've known people with 350 credit scores with 19% interest paying off 13k loans...that makes no sense.

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vineviz
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by vineviz » Mon Aug 13, 2018 11:19 am

redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I've only had line for a couple years, yes I've missed a couple payments. I've paid off a couple, dropped some too. I'm not going to sell my car, I need to follow through with it. I've made EVERY payment, I'm not struggling to pay it is what I'm saying here.

He wants to loan me the money so I avoid interest. Like I said, I'm not struggling to make this payment.
It sounds like your mind is made up, though that makes me wonder what question you're really asking us.

I'll only add that I hope you'll think about things: 1) This "need to follow through with it" is a big red flag to me with respect to your willingness to sacrifice in order to fix your mistake in purchasing this car; and 2) You say you're "not struggling to make this payment" but you ARE also carrying credit card debt in addition to predatory terms on a car loan and haven't mentioned anything about saving for either retirement or an emergency fund.

I'm not judging you personally, but anyone with enough consumer debt that it is preventing them from saving is "struggling" whether they frame it that way or not.

Good luck.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by 123 » Mon Aug 13, 2018 11:31 am

Have you looked at the real numbers to see if paying off the loan early will really save any interest? Auto loans can be calculated in a couple of different ways. If your loan is a simple interest loan where you pay interest on the unpaid balance you can be money ahead by paying it off early. Some loans can obligate you to pay off all the payments, even if you pay them early. I would suspect that at the interest rate the OP was charged, and accepted, that there was no reason for the loan originator to do anything that could potentially be favorable to the borrower. The OP should carefully scrutinize the loan agreement and the loan repayment schedule to see the mechanics of the loan. The commission that was paid to the salesperson that sold the loan to the OP likely had to get baked into the terms of the loan somewhere.
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dia » Mon Aug 13, 2018 12:08 pm

If you do decide to borrow the money from family (or anybody): Pay EVERY month just like any loan with any professional lender. I loaned money to a family member and what drove me nuts is the person would pay when they felt like it. Or, they paid when it was convenient in regard to the other things they wanted to do with their lives (ie weekend trips, etc). I think because it's a family member being paid back, some people take advantage, assuming that you won't miss the money anyway. When they asked for the money--they said they will pay back every 2 weeks, a certain dollar amount out of every paycheck and would never "stiff us." Without hesitation, we wrote out a check. They said it was to pay off medical bills.

When I didn't receive a payment for a few months, I HATED HATED HATED having to mention it, but just because I felt like I was being disrespected, I would put out a gentle reminder. Eventually, I would be handed a hundred dollars or so (cash) without any idea when the next one would arrive, and the dollar amounts would be different each time. This experience was very disheartening--I felt I was helping a family member out who said they needed the money to pay some medical bills.

You don't sound at all like the kind of person that would be this way but just wanted to relay my experience. It wasn't the money that was the issue, I could have easily told them to forget it and pay their bills, but there was this feeling of disrespect that I couldn't get past. It's now about 5 years later, I received in total about 1/2 the money that I loaned and then the payments stopped. I quit asking for it and yes I think about it everytime I see this person even though I try not to. Not sure what that money was used for. Lesson Learned.
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by magicrat » Mon Aug 13, 2018 12:13 pm

redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I've known people with 350 credit scores with 19% interest paying off 13k loans...that makes no sense.
But you think a 560 credit score and a 13% loan make sense? Do what you think is best of course, but know that taking this loan will not fix your problems.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Raybo » Mon Aug 13, 2018 12:14 pm

redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I would simply pay him the same I would any other loan/credit...the day I get paid.
What happens if you lose your job?
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dm200 » Mon Aug 13, 2018 12:46 pm

redbeard25 wrote:
Mon Aug 13, 2018 5:25 am
Hey everyone!
Last night a family member made a suggestion on helping me pay off my auto loan. Basically, he offered to loan $15k (cash), I'd pay monthly eliminate the additional $5k allowing me to pay off sooner. I'm reaching out for positive and negative factors to consider here.
Furter details:
-My principal balance is $15000 @ 72mo (52 payments left)
-Interest rate is 12.99% (cannot refinance with capitol one)
-Credit score is low (560)
Negative aspects to consider is the fact paying off this loan will ding my credit score. Would this make it harder to take out additional loans? (not planning on taking any out anytime soon)
Positive:
-Paying sooner will allow me to save $5k in the long run (2-3 years sooner), allowing me to free up $400-$500/month to attack smaller CC debts (total under $4k)
-Not sure about auto insurance, but paying off would allow me to adjust full-coverage status possibly?
What are your thoughts? Should I do this?
I doubt paying off the car loan will hurt your credit score.

How would payments and interest be done with relative? Two risks I see: 1. relative wants/needs the money sooner and 2. Interest and payment calculations are incorrect or misunderstood.

I think I would lean against it because of possible future problems and misunderstandings with the relative.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by TomatoTomahto » Mon Aug 13, 2018 12:54 pm

magicrat wrote:
Mon Aug 13, 2018 12:13 pm
redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I've known people with 350 credit scores with 19% interest paying off 13k loans...that makes no sense.
But you think a 560 credit score and a 13% loan make sense? Do what you think is best of course, but know that taking this loan will not fix your problems.
It sounds like your mind is made up. I hope it works out for you both. If it doesn’t, please let us know which episode of Judge Judy you’ll be on; this is a perennial script on the show.
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by gotester2000 » Mon Aug 13, 2018 1:09 pm

OP,

From your posted information, the problem is clearly related to your financial habits. Consider this as an opportunity to improve them - the punitive interest should change them. If you take help from the relative now - most probably you will create another big ticket loan at high interest in a few years.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dm200 » Mon Aug 13, 2018 1:21 pm

gotester2000 wrote:
Mon Aug 13, 2018 1:09 pm
OP,
From your posted information, the problem is clearly related to your financial habits. Consider this as an opportunity to improve them - the punitive interest should change them. If you take help from the relative now - most probably you will create another big ticket loan at high interest in a few years.
To avoid inaccurate or misunderstood interest payments (if any) to the relative, let me suggest a method that is simpler and less likely to be misunderstood. Pay once a month and consider every month 1/12 of a year. Pay back the loan as Principal plus interest. Every month your payment will be a little lower.

Decide how many months you will repay. Let's use the principal amount of $15,000 and 60 months. $15,000 divided by 60 is $250.00 per month principal. Say the interest rate you agree to is 6.00% per year, which is 0.50% per month on the unpaid balance. So, at the end of the first month you pay interest of $75.00 + $250.00 principal = $325.00.

The principal is now reduced to $14,750 - so the second month you pay interest of $73.75 + $250.00 = $323.75 - and so on until the loan is paid off.

This method makes paying principal early calculations very easy, as well as if principal payments fall behind, for some reason.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by CFOKevin » Mon Aug 13, 2018 1:40 pm

redbeard,

Assuming you are going ahead with the intrafamily loan, my suggestion would be to put it in writing and prioritize the payment even more than you did with Capital One. Make every effort to pay it off early to show appreciation for what your family member is doing for you.

Pay it forward someday yourself.

Kevin

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by ThePrince » Mon Aug 13, 2018 1:56 pm

OnTrack2020 wrote:
Mon Aug 13, 2018 6:37 am
I am convinced that people who say "sell the car" and buy a clunker for a few thousand dollars have never spent time sitting in a repair shop. If you have lots of time, great; otherwise don't do it, not worth it.

Personally, I would not borrow from a family member, but rather see if I could pick up a small part-time job to throw money at this debt until it is paid off.

I’m convinced you’re incorrect. I drive an almost 9-year old vehicle. Sure many more BH’s are in the same or similar boat.

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dm200
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dm200 » Mon Aug 13, 2018 2:37 pm

ThePrince wrote:
Mon Aug 13, 2018 1:56 pm
OnTrack2020 wrote:
Mon Aug 13, 2018 6:37 am
I am convinced that people who say "sell the car" and buy a clunker for a few thousand dollars have never spent time sitting in a repair shop. If you have lots of time, great; otherwise don't do it, not worth it.
Personally, I would not borrow from a family member, but rather see if I could pick up a small part-time job to throw money at this debt until it is paid off.
I’m convinced you’re incorrect. I drive an almost 9-year old vehicle. Sure many more BH’s are in the same or similar boat.
Now, in retirement, DW and I still have two cars - BUT one is 20 years old and the other is 16. Both, though, have under 100,000 miles - bought both used 1 and 3 years ago.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by drawpoker » Mon Aug 13, 2018 2:47 pm

TomatoTomahto wrote:
Mon Aug 13, 2018 12:54 pm
......please let us know which episode of Judge Judy you’ll be on; this is a perennial script on the show.
^

This

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dm200 » Mon Aug 13, 2018 2:49 pm

Wonder if any folks have a "war story" on this topic - from either direction?

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by T4REngineer » Mon Aug 13, 2018 3:21 pm

The general advice is almost always going to be do not borrow money from family and friends (with good reason)

In your case I am a bit concerned with your comment stating the relative can easily afford it - makes me think in hard times you would be more willing to bail on this payment then if it was to bank who would repo your car but that may be reading into it.

My guess is the interested saved is substantial money for you and in that case I have a hard time not recommending take the money from the relative, do I see it as a dodge - yes but if it save you 4-5k and you have a net worth of -3k or even 50k that's a HUGE savings, that matter.

If you do take the money follow through with your commitment to pay off other loans do not get anything new, do not go out to eat more, etc.

Also how does this math work out "Paying sooner will allow me to save $5k in the long run (2-3 years sooner), allowing me to free up $400-$500/month to attack smaller CC debts (total under $4k" - If they give you the money you still have to pay them monthly just a smaller amount due to lower (no?) interest charged correct?

Regardless best of luck and if you do not already spend some time on this forum - lots of smart people from all walks of life with different opinions but generally good discussions

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Fallible » Mon Aug 13, 2018 3:26 pm

redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I've only had line for a couple years, yes I've missed a couple payments. I've paid off a couple, dropped some too. I'm not going to sell my car, I need to follow through with it. I've made EVERY payment, I'm not struggling to pay it is what I'm saying here.

He wants to loan me the money so I avoid interest. Like I said, I'm not struggling to make this payment.
My car payment is $373, auto $187
I would simply pay him the same I would any other loan/credit...the day I get paid.
I would pay him $400/month for 3 years probably some month pay $500 like I have been. ...
Will this agreement be in writing? If not, I think both you and the potential lender could benefit from reading up on personal loans. Here is one from bankrate.com, which reads in part:
In the best-case scenario, a lender would write a detailed payback plan before making a personal loan to a friend or family member. Both the borrower and lender would sign the agreement and have it notarized. If you didn’t create a written repayment plan before lending the money, it’s not too late to do that, says Mark Chatow, attorney at Chatow Law in Newport Beach, California.

After a personal loan has been made, the best way to approach a written payment schedule and agreement is to suggest to debtors that “it might be easier for them to break the loan into realistic payments that they can make over time,” Chatow says. “Even very small payments can at least get the repayment cycle started if they’re done regularly. That opens up an opportunity to talk about the number of payments, the amount and when they’ll start,” Chatow says. “Once you both agree, try to put something in writing.”

Having a written agreement in place doesn’t just provide borrowers with a path to repayment of personal loans — it also gives the lender legal footing. It can serve as a binding agreement in the event of litigation, and “removes the transaction from a personal realm to a professional realm,” says attorney Drew Nordgren of The Nordgren Law Firm in Baton Rouge, Louisiana.
Link:
https://www.bankrate.com/loans/personal ... y/#slide=3
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by dm200 » Mon Aug 13, 2018 3:29 pm

One place/situation where I have seen this work better is when the parties are from a culture where this is very common - and misunderstandings/conflicts are rare.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Elsebet » Mon Aug 13, 2018 3:38 pm

Although it's tempting, I would advise you to not take the money from the relative since it's not an emergency at this time. Paying this debt off by yourself with no outside help will build character and teach an important life lesson for the future. Self-reliance is an important virtue; I would also recommend a second job before taking loans from family.

Personally I would not sell the car, instead pay it off and keep it for 15+ years and its presence will remind you to be smarter next time. :)

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Fallible » Mon Aug 13, 2018 4:17 pm

Elsebet wrote:
Mon Aug 13, 2018 3:38 pm
Although it's tempting, I would advise you to not take the money from the relative since it's not an emergency at this time. Paying this debt off by yourself with no outside help will build character and teach an important life lesson for the future. Self-reliance is an important virtue; I would also recommend a second job before taking loans from family.

Personally I would not sell the car, instead pay it off and keep it for 15+ years and its presence will remind you to be smarter next time. :)
I believe this sums it up wisely for both the potential borrower and the lender.
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Re: Should I Do This? [borrow from relative to pay off loan]

Post by Jags4186 » Mon Aug 13, 2018 4:31 pm

You owe approximate $12,000 on this car still. How quickly can you pay that off? If you take the relatives money the urgency to repay goes away. If you hunker down and pay it off in the next 12 months you’ll avoid $1000s in interest.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 4:42 pm

Everyone has great points...that's what I was looking for. I'm not going to follow through with his offer, I just wanted opinions. I don't have many serious expenses other then paying my sister rent, ON TIME and basically my car and a couple small CC debts.

I understand I need to see the bigger picture, retirement, having a savings, ect...I guess I'm thinking how I can get rid of this debt in 2-3 years. I need to read Dave's book again, because I need to get my head out of the gutter.

BTW OP suggested this to me, so I needed clarification from people better fit for this idea he presented. He asked, it sounded like a good idea. He got a large settlement (hence the reason for cash), I've been a caretaker for their child for 6 years so he wanted to help me somehow.

I pay my rent on time every single month (which is my sister not OP). She whipped me into shape after I pulled that not paying on time crap

So I pay off some of my loan by selling my car for 12k with a balance.
I buy a clunker for $2500
The tranny goes...
The engine blows
The axles snap
Sold a lemon...
This has happened to me, a reason I opted for something newer. These previous cars were either bad luck, but purchased by my father and handed to me. With my current car, I wanted something reliable. So yes, not really thinking logically at the moment. Yes, this wasn't a wise decision but we all aren't perfect right?

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 4:43 pm

Fallible wrote:
Mon Aug 13, 2018 4:17 pm
Elsebet wrote:
Mon Aug 13, 2018 3:38 pm
Although it's tempting, I would advise you to not take the money from the relative since it's not an emergency at this time. Paying this debt off by yourself with no outside help will build character and teach an important life lesson for the future. Self-reliance is an important virtue; I would also recommend a second job before taking loans from family.

Personally I would not sell the car, instead pay it off and keep it for 15+ years and its presence will remind you to be smarter next time. :)
I believe this sums it up wisely for both the potential borrower and the lender.
yes!!! Ok, there's the answer I wanted

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by redbeard25 » Mon Aug 13, 2018 6:26 pm

redbeard25 wrote:
Mon Aug 13, 2018 4:42 pm
Everyone has great points...that's what I was looking for. I'm not going to follow through with his offer, I just wanted opinions. I don't have many serious expenses other then paying my sister rent, ON TIME and basically my car and a couple small CC debts.

I understand I need to see the bigger picture, retirement, having a savings, ect...I guess I'm thinking how I can get rid of this debt in 2-3 years. I need to read Dave's book again, because I need to get my head out of the gutter.

BTW OP suggested this to me, so I needed clarification from people better fit for this idea he presented. He asked, it sounded like a good idea. He got a large settlement (hence the reason for cash), I've been a caretaker for their child for 6 years so he wanted to help me somehow.

I pay my rent on time every single month (which is my sister not OP). She whipped me into shape after I pulled that not paying on time crap

So I pay off some of my loan by selling my car for 12k with a balance.
I buy a clunker for $2500
The tranny goes...
The engine blows
The axles snap
Sold a lemon...
This has happened to me, a reason I opted for something newer. These previous cars were either bad luck, but purchased by my father and handed to me. With my current car, I wanted something reliable. So yes, not really thinking logically at the moment. Yes, this wasn't a wise decision but we all aren't perfect right?

Forget about the auto loan... I would rather have him lend me $3500, cut cards and just have one payment. The interest on these are insane and I'd rather focus on eliminating that first.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by mortfree » Mon Aug 13, 2018 6:31 pm

In 1999 I purchased a brand new 22k car 1 month before I even officially graduated college and started my first job. Salary 30k. Loan for 5 years around 6%.

I survived.

Keep the car.

Accept the money for the credit card.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by 9liner » Mon Aug 13, 2018 6:46 pm

redbeard25 wrote:
Mon Aug 13, 2018 11:04 am
I've known people with 350 credit scores with 19% interest paying off 13k loans...that makes no sense.
But paying 12.99% interest on a 15k dollar loan somehow makes sense?

Sell the car.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by stoptothink » Mon Aug 13, 2018 7:50 pm

dm200 wrote:
Mon Aug 13, 2018 2:49 pm
Wonder if any folks have a "war story" on this topic - from either direction?
I'm sure I'm not alone in having several, one involving each of my brothers (separately) and three childhood friends (again, separately). All happened over the course of about 3yrs when I was in my mid 20's, single, and doing quite well for myself. Each situation involving $5k-$25k. The worst thing was watching them go on vacations and buy new toys, while not paying me a dime. That was especially difficult a handful of years later when a divorce pretty much left me starting back at square one financially. I did have too much pride to tell them that I might need help, but they all knew I went through a rough patch. Ultimately I decided to look at all the "loans" as a gift and simply not expect to ever be paid back. My best friend is the only one who will periodically mention that someday he intends to pay me back. Considering he has purchased a home and several vehicles since paying me a penny, I tell him not bring it up because I now consider it a lesson learned and bringing it up just angers me. They are all generally responsible human beings, with (I would assume) much higher credit scores than the OP and the situations were a tad more dire (in 2 of the 5, it involved them possibly losing their homes during the real estate crash).

No doubt it is still a sore spot and I just have a unilateral rule (shared with my wife) that we do not "loan" to family or friends for any reason, regardless of the situation. We have gifted my in-laws countless 4-figure sums when they have asked for loans, but they are probably the most financially irresponsible people I have ever met; there was no point in beating around the bush even thinking that one day they'd pay us back.
Last edited by stoptothink on Mon Aug 13, 2018 8:10 pm, edited 1 time in total.

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by thrifty_one » Mon Aug 13, 2018 8:03 pm

I believe in the teach them how to fish approach rather than giving the fish.. no handouts in my book.
LBYM

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Re: Should I Do This? [borrow from relative to pay off loan]

Post by celia » Mon Aug 13, 2018 8:17 pm

It doesn't make sense to me that you would take out a new loan to pay off an existing one. Will the interest rate be the same? Will your relative be able to report your payments to the credit reporting companies so your credit score can go up? What will the penalty be (besides bad feelings) if you skip a payment or are late?

I don't recommend the loan from a relative, but if you do it, you both should sign a contract like you did with the original loan, with the payment schedule and late fees spelled out. You could even use the same form but just change the name of the lender. Keep this as a business transaction, not a friendly favor on either side. Don't forget that if either or both of you die before it is paid off, your estate will still owe money to the relative's estate. And you still need to keep adequate insurance coverage in case the car is in an accident and loses value.

But I still don't see the point of changing lenders.

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