In the interest of train wrecks...PL ponderings

[nidena]

From June 2022: I also offered to help out a friend with paying off her car. She's an EMT who got hit with COVID twice in the past year and that hit her pocketbook pretty badly. She financed her car through one of those used car places that charge you an arm and a leg in interest--her's is at 26+%--and was on track to pay it off last fall...until she got sick. She has only a bit left so I'm gonna help her out over the next couple months.

I use friend and niece interchangeably for this young woman because I've known her since she was born.  So, with me doing this for her, she was able to redirect her funds into going to school for something that increases her EMT skills.  I got a PL for $5000 at 7.39%; of which $3990 remains since I've been focusing on paying other things off...namely my two CCs.  They're paid off and I now have a third with a BT balance of $4796 at 0%.

I have another friend who makes very little, has no savings because of it, got laid off for a short time last year, and whose credit score is now even lower than it was before due to being laid off and missing payments.  Last year was terrible for her.  She got in a car wreck and had to replace her vehicle which, with her 400ish credit score, netted her a car payment of $500+ at 15-something %.  I think she still owes $13,000 or so on it.  She is now gainfully employed but her income is somewhere around $1800-$2000/mo.

So...I've pondered taking over the debt just to give her some breathing room.

Would I do it right now?  No.  I have other things to pay off.  

Am I still pondering it, even knowing how shitty she is with money?  Yes.

Do I think grownups should take care of their own issues?  Yes.

Do I think someone can budget themselves out of poverty and mental health issues?  Nope.

Do I think some of her mental health challenges would be alleviated by having this very expensive debt be gone?  Yes.

Do I wonder if I'd be enabling other poor decisions?  Yep.

[Bonny]

Mar 4, 2023 11:07:47 GMT -5 nidena said:

From June 2022: I also offered to help out a friend with paying off her car. She's an EMT who got hit with COVID twice in the past year and that hit her pocketbook pretty badly. She financed her car through one of those used car places that charge you an arm and a leg in interest--her's is at 26+%--and was on track to pay it off last fall...until she got sick. She has only a bit left so I'm gonna help her out over the next couple months.

I use friend and niece interchangeably for this young woman because I've known her since she was born.  So, with me doing this for her, she was able to redirect her funds into going to school for something that increases her EMT skills.  I got a PL for $5000 at 7.39%; of which $3990 remains since I've been focusing on paying other things off...namely my two CCs.  They're paid off and I now have a third with a BT balance of $4796 at 0%.

I have another friend who makes very little, has no savings because of it, got laid off for a short time last year, and whose credit score is now even lower than it was before due to being laid off and missing payments.  Last year was terrible for her.  She got in a car wreck and had to replace her vehicle which, with her 400ish credit score, netted her a car payment of $500+ at 15-something %.  I think she still owes $13,000 or so on it.  She is now gainfully employed but her income is somewhere around $1800-$2000/mo.

So...I've pondered taking over the debt just to give her some breathing room.

Would I do it right now?  No.  I have other things to pay off.  

Am I still pondering it, even knowing how shitty she is with money?  Yes.

Do I think grownups should take care of their own issues?  Yes.

Do I think someone can budget themselves out of poverty and mental health issues?  Nope.

Do I think some of her mental health challenges would be alleviated by having this very expensive debt be gone?  Yes.

Do I wonder if I'd be enabling other poor decisions?  Yep.

I'm posting with the idea that you are requesting our opinions about the course of action you are pondering.

Your heart is in the right place. But in order to preserve the relationships I think mentally you have to write any help off as a gift rather than a loan. And with that in mind I would never take on some's debt or take a loan on behalf of someone else. If you don't have the cash you can't afford it either.

My experience with lending money (and for that matter a short term loan from MIL) hasn't been good. My family could never get its act together to pay what they borrowed. I took it personally that they didn't care enough about me instead of they make poor choices and they screw everyone over. With my MIL, the "discounted" interest rate was made up for the literal decades of being reminded how she helped us. We paid her back early and she complained about how she couldn't find an investment that paid as well as us.  That's an unaffordable loan!

Good luck with whatever decision you make.

[CCL]

How is the first friend doing with paying you back? If she's doing well, and also working on career goals, I don't see anything wrong with helping her out. If she's making little effort, then that tells you something.

[azucena]

You still have your own credit cards balances and a PL. Don't think about loaning anyone money until those are paid off and you've gone at least six months without new credit card balances. Anything less is a recipe for disaster.

[nidena]

Mar 4, 2023 12:59:42 GMT -5 CCL said:

How is the first friend doing with paying you back? If she's doing well, and also working on career goals, I don't see anything wrong with helping her out. If she's making little effort, then that tells you something.

The first friend wasn't a loan.  It was a gift.  She's a single parent of two and makes very little.

[nidena]

Mar 4, 2023 14:38:38 GMT -5 azucena said:

You still have your own credit cards balances and a PL. Don't think about loaning anyone money until those are paid off and you've gone at least six months without new credit card balances. Anything less is a recipe for disaster.

How do you figure?

[azucena]

Mar 4, 2023 14:42:08 GMT -5 nidena said:

Mar 4, 2023 14:38:38 GMT -5 azucena said:

You still have your own credit cards balances and a PL. Don't think about loaning anyone money until those are paid off and you've gone at least six months without new credit card balances. Anything less is a recipe for disaster.

How do you figure?

Because you are pay 7% interest on your own personal loan. Why would you take on payments for a friend when that payment could pay down your own debt.

There are reasons that the friend can't get a loan <10%. Institutions know her payment history and high risk profile.

[nidena]

Mar 4, 2023 16:27:26 GMT -5 azucena said:

Mar 4, 2023 14:42:08 GMT -5 nidena said:

How do you figure?

Because you are pay 7% interest on your own personal loan. Why would you take on payments for a friend when that payment could pay down your own debt.

There are reasons that the friend can't get a loan <10%. Institutions know her payment history and high risk profile.

You might have missed the part where I said I wouldn't be doing it right now, specifically because I have other things to pay off currently.

[nidena]

Some assumptions went into my OP, in that I forgot that not everyone reads any or all the same threads I do which means folx wouldn't see the snippets that I've shared about this situation in those threads.

While I do have balances on two CCs, neither of them are interest bearing.  The Visa's balance is since the statement was printed.  That actual balance due was paid off on the 1st and any current charges will be paid off before any interest can accrue.  The MC has a BT balance at 0% that will be paid off by the income from my PT job.  The MC and my PT income go into an account held by a bank totally separate from my regular/primary income.

The current primary income (~$4100/mo) pays my mortgage ($622/mo and 2.75%), my vehicle ($308/mo and .99%), my monthly expenses/bills (~$1500/mo), and the PL ($156/mo and 7.39%).  Again, the interest-accruing CC balances that I had were completely paid off last week.

The PT income is ~$1200/mo, of which $25/payday goes to I-bond purchases, $50/payday goes into the future auto expenses account (registration/sirius/tires/insurance), $100/mo is the min payment on the MC, and then $200-$300/payday additional towards paying off the BT.  Whatever is left maintains the cushion and accommodates my gas purchases.

As far as my friend not being able to get loans that are low in interest rate...yeah, she got laid off for a couple months in the Fall.  She makes nearly nothing to begin with.  She also has ADHD and is Bipolar which can wreck havoc when you can't afford to go to the doctor to get the prescriptions refilled which then contributes to depression and some serious executive disfunction.  She missed a month or two of payments while she was laid off.  It's a shitshow of dominos.

I WANT to help but I'm not diving in, head first.  I'm putting my own oxygen mask on first.  That's why I haven't helped her yet.  That's why I'm not helping her for at least a month or two.  I KNOW I need to get through my own stuff first.

[nidena]

I should also add--in case anyone is like me and doesn't always remember or know the situation with any particular screenname--that my primary income is military pension and VA disability.  Unless Congress wants to lose a tremendous amount of votes, I consider both to be pretty safe in their perpetuity.  

[debthaven]

nidena , honestly, I thought you were joking about wanting to help your friend based on the other thread about "needing a train wreck". 

I'm assuming what azucena means is, as long as you are still carrying balances on your own cards, you're not in a position to take on anybody else's debt. Regardless of interest!!! And even if your cards were all paid off (which they're NOT), WHY ON EARTH would you take on somebody else'd debt?!

PLEASE don't sabotage your own progress! 

You'd honestly be better off GIVING her a MUCH smaller sum of money, or paying a bill for her, or buying her groceries, or taking her out, than taking on her debt. And nothing regular, lest she expect it to carry on.

You certainly shouldn't be doing more for her than she's doing for herself. 

If you feel the need to do charitable work, then go for it. But if you have time to do that, it doesn't need to be linked to your credit card.

ETA: I know you're very big-hearted, but get your own situation REALLY straightened out, and give a smaller, affordable gift instead. If SHE'S not worried about her debt, WHY ARE YOU?!

[Tiny]

Nidena, I'm just throwing this out there.

taking personal loans and/or carrying credit card balances costs money.

You want to help people.

Could you figure out how much per month of your income you'd be willing to use towards this endeavor of helping people? Or maybe a yearly amount you are comfortable with divided by 12.

Once your current debts are paid off - could you keep paying some amount based on the previous question - but put it into a savings account (or HYSA)?

You could do this and at some point with the account hits your "number" you could then decide how to apply that money to best help someone.  You'd still have the monthly amount paying into it (to re fill it). 

Basically, you would use this fund to help someone. If they pay you back - the money goes back into this fund and you use it to help someone else. If they don't pay you back - it's ok, you have that fixed monthly amount you are paying into the fund to keep rebuilding it so you can help other people.

You'd treat this as a monthly bill you have to pay (that fixed monthly amount). You would help people and not have to pay extra (in interest) to do it.  It's not that much different than what you are doing now - except you are using "money you got yesterday" to help someone "today" instead of buying money you will pay for with "tomorrow/future money" to help someone "today".   

Doesn't it hurt just a little that money you pay in interest could have been used to provide additional help??

[nidena]

I forgot to mention, in terms of my friend, she is also the sole caregiver of her widowed father who is dying of cancer.  And is completing her Masters...to the best of her spoons ability.  It just really sucks to see all that she is dealing with.

[debthaven]

You sound like a wonderful friend nidena . But you still have your own debt to deal with. 

I think Tiny has a wonderful idea! 

And in the meantime, you can still be a sounding board, have her over, take her out, etc, without compromising your own progress.