Skip to main content
No. of Recommendations: 8
Hi js

I've been approached several times for what you describe.
Here is how I handled it.

My primary consideration is:
Would I be willing to just GIVE this amount away?
A "loan" is a contract, and for me, sets up expectations. No matter the amount, if it's not repaid, I feel betrayed.
Therefore, before I "loan" any amount, I set MY OWN expectations, that it's a "gift", so that I dont have the emotional (betrayal) attachment. This is personal, and I dont share it with the other party.

My process:
First, I pondered if the solution was doable?
If "no", then I bowed out.
If "yes", then, is it doable for me/ralph (there are many factors in this answer: emotional, financial, my personal goals, family 'responsibility', see my primary goal-above, etc).
I asked myself is this something that I (me, ralph) need to do (i.e. is it mine to do)?
If "no", then I refused and watched from afar.
If "yes", then
I asked overall, what can I do (overall, in a perfect world)?
After I had that answer, I asked
What am I WILLING to do?
THIS is the most useful answer for me. What I'm WILLING to do.

In one case, I was asked to cosign a small note for a 19/20 year old.
I did so, and was pleased with the result.
Later, the same person wanted me to cosign a 3x larger, for education, skill development, loan. Based on the first experience, I did, but with poor results. As the cosigner, I wound up repaying the loan. I violated my primary goal, too! The amount was inconsequential, but the emotional aspects were longlasting. Later, another request was denied. There are still emotional and interpersonal consequences being worked through.

In another instance, a senior in high school, final 3 months, was going to DROP OUT, due to some, IMO, minor finance issues. No help was requested, but, I insisted on "helping". It was a BIG win! BIG!!


So. Can you see yourself making this amount (in your own head) a "gift", so that no matter the outcome, you are emotionally ok with the outcome?
Do you feel like you NEED to do something? Is it yours to do?
Can you financially afford it?
Are you WILLING to afford it?
If you are not willing to afford the whole amount,... How much ARE you willing to afford? You don't have to be the only source of support. You can put "strings" on it, too (maintain x hours per semester, x GPA, matching support, etc).
You are potentially being asked to support two students. Perhaps factor that into what you "can do" and are "willing to do"?

As you are aware, there are consequences to both "no" and "yes". My denial of the third cosign/loan mentioned above has led to some sadness on my part, and apparently anger (they feel betrayed?) on others' part. We are estranged. But, in my own head, I am "ok", since I followed my process. I'm not carrying any emotional baggage around, over this.

Consequences? One time, I "loaned" a small amount (low hundreds), and was not paid back. My "I'm willing to give this amount" choice keeps me from being bitter. An added benefit, is that person doesn't ask another time. 🙂

That's my process, and so far, it's mostly worked for my own personal emotional and financial well being.

🙂 good luck in your decisions.
ralph
Print the post  

Announcements

UGC Disclosure Notice Regarding Credit Card Posts
Community board discussions about credit cards are not provided or commissioned by banks who may have advertising relationships with The Motley Fool. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.
TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.