Loan to younger brother

[sahtt]

Prime,

I have a decent head on my shoulders but the average prime member has me beat in the wisdom category.

My younger brother is in his early 20's and has one semester of college left. A clueless tourist in a volvo ran a red light and likely totaled his 2007 civic; he'll get $8-9k for it. I'm considering loaning/giving him ~3k so he can get something fairly new and reliable. 5 years ago 8-9k was a fantastic used car, now it gets you a 5-6 year old import with 90-100k on it. He doesn't have much savings and his part time job doesn't pay much.

For friends I quickly learned not to loan anyone money - simply give it to them and hope they pay it back. Otherwise every time they go out and waste $50 at a bar it will annoy the hell out of you. I have a buddy who thinks I "loaned" him $100 that has spent $500 at bars since I gave him the money (not coincidence of course).

I don't think giving him the money is the right approach. My grand mother gave him the civic and his college expenses have been covered ($0 spending money though, he's worked part time throughout college).

Don't worry, my family doesn't hate me; my grand father died when my brother started college (and I graduated) that set money aside for education.

How can I create the most value through this agreement? I considered tying it to grades or using it to motivate him to get an internship, etc. $500 reduction in principle if all A's? No interest if he gets a job prior to graduation? Any suggestions or am I wasting my mental energy?

 

[chado]

Too modest, but agree can still make for a tough decision.

1 - I would say either a variable APR that starts at 0% and adjusts upwards per quarter/month (depending on how low you start it).

2 - What actually might turn out to be the best idea for both of you would be just to help him find a car in his price range that will be reliable for the next 5-7 years or so. In this case you help him out, but avoid all potential monetary headaches.

I've got a younger brother and sister and I've been in this same position with each of them over the past few years... Didn't turn out well when I chose to give the funds with out conditions.. Even with conditions doesn't mean you won't deal with plenty of headaches that are "out of their control".

Good luck.

 

[docjohn]

depends on your relationship and his personality/work ethic.My opinion on the matter is to never loan money to a loved one....just give it.....how they chose to "repay' you is personal.Besides if someone needs a few thousand dolars they will likely not be repaying soon.

 

[NSX167]

Loan the money to your brother, and ask him pay back after graduation in 1 or 2 years. When he return the money back to you, show him the elder brother love because you just want to motivate him, then tell him that there is no need to return the money :smile:

 

[L_RAO]

First off, does your brother want more car than he can afford?

The teach-value-lesson play here is to have him buy a $12,000 car from a motivated seller for $9000; any other monies that come into play here is just more of a godsend to him.

He didn't have to worry about paying for college, and he didn't have to worry about paying for a car. This would be a big step towards reality for him.

 

[Hard Five]

Maybe it's a regional thing, but 2007 Civics are more like 10-11k in my area. Best thing you could do would be seriously eval the market in your area and argue for an increased value if its warranted.

I used to do claims and can honestly say popular cars (like the Civic) would routinely come in low. Once the offer and evaluation is complete, I can give you advice on exactly what to do should you need it.

 

[CarterK]

It really depends on your relationship with your brother. I could loan my brother money and be secure knowing that his first priority will be to pay me back. As such I wouldn't worry about setting any future 'penalties' to motivate him to pay. Also, I think it might be a bit tricky to start rewarding him for good grades etc as that really isn't your job. You are his brother, not his parent, and mixing up that dynamic can make both parties feel weird.

Then again I'm not sure what your age difference is, that can make a big difference in the relationship dynamic.

 

[Ric]

Be prepared to never see the money back for a very very long time. If you love your bro and don't care about the money, just do it.

 

[sahtt]

Good suggestions as expected. I'm far from rich but it's not a big deal if I don't see the money for a long time. I don't care about the actual money but I do take the principle seriously.

Fortunately I have a lot of experience buying and selling cars/motorcycles and negotiation in general; I'll ensure he gets a good price for his car (it has 105k miles on it btw) and on whatever he buys. I'll probably structure it like the average college loan and have payments start 6 months after his graduation.

 

[goa360]

You take principles seriously then make sure he does not say a word back esp about repaying. I have a feeling you will just give him anyway. If you are a person who cannot be at peace until you payback if you loaned from friend then it gets worse.

Personal experience with cousin brother. The good thing he never calls me anymore after getting job. I am not saying this will repeat.

The principle will disturb more than $.

 

[Miner]

If you want to help your brother, don't lend him money. Lend him time to search for a car he can afford.

I have learned over the last 10 or so years that being "The Bank of Miner" with family has helped nobody.

Just my .02 cents.

Miner

 

[joboy77]

Be prepared to never see the money back for a very very long time. If you love your bro and don't care about the money, just do it.

^This.^ Whenever you loan money to family consider it a gift. If you get it back then it's bonus money. Just get him a car in his price range. So what if it has high miles. A well taken care of civic or camry or accord or whatever will last more than long enough to get him through school and an internship. Then when he finds a decent paying job he can get a nice car on his own.

 

[s2kNSX]

Ahhhh the America culture where people give or get a loan to their mom dad brother and sister....I thoughts loans are reserve for the bank?
Anyways I just find it odd that people who considers themselves siblings loan to each other...my brother and I give each other money when needed without asking back for it...after all we arrrrrre family.

Ps this is not a reference to the OP but a general observation

Zaid

 

[VampNSXX]

Ahhhh the America culture where people give or get a loan to their mom dad brother and sister....I thoughts loans are reserve for the bank?
Anyways I just find it odd that people who considers themselves siblings loan to each other...my brother and I give each other money when needed without asking back for it...after all we arrrrrre family.

Ps this is not a reference to the OP but a general observation

Zaid

Well when you have money given to you it is easy to give it away. When you work your ass off for every penny you have like I did its hard to just give it away. It all depends on your situation. I had nothing and use to sleep on the floor in my aunts house for 2 years until I got on my feet. So it's just different for all of us.

 

[LoveNSXs]

This is very interesting... as something similar happened in my family.. but different circumstances.

My older sister actually did up a contract for my little sister when she started school. This was in response to my mom telling my older sis that she SHOULD help out... My mom was offended/pissed off by the contract..

My older sister explained to me that our mother had actually created rifts among her siblings because of 'money issues'. This meant we couldnt play with our cousins or talk to them. Weird right?

Everyone is different, but when dealing with family, money is.. interesting. If he is what you think he is, he will find a way to get it back to you in the future. I, personally, would give my immediate family money and not expect anything in return, as they do the same for me if I really need money.

I've 'loaned' money to a few friends. I tell them to pay me as soon as they can. But I honestly didn't/don't expect to see any of it back. If I do, bonus for me. I 'loaned' it to them in the first place because they needed it way more than I did. That's just me, though.

If you feel obligated to help him out, do so in a way that won't create any rifts in the future or make you lose sleep at night. It just isn't worth it!

 

[sahtt]

Ahhhh the America culture where people give or get a loan to their mom dad brother and sister....I thoughts loans are reserve for the bank?
Anyways I just find it odd that people who considers themselves siblings loan to each other...my brother and I give each other money when needed without asking back for it...after all we arrrrrre family.

Ps this is not a reference to the OP but a general observation

Zaid

If your sibling came to you with a business idea and asked you to invest/loan him 50k you'd just give it to him? No strings attached? That's not efficient or sustainable.

If he wants to borrow money (he's not starving) and I have plenty sitting in a money market account, it makes sense to loan it to him on favorable terms. Of course if he was literally at rock bottom I'd do whatever is necessary to keep him a float. This is also ignoring the most critical element - we are humans not robots. If you start handing out thousands of dollars to your siblings anytime they ask you are a fool and they are probably an all star at the local gentleman's club.

 

[s2kNSX]

I see ur point above and I agree
What I made was a general observation
too often I see kids who are kicked outta the house 18 cause they are an adult now or that they have to start paying rent at their parents house now.
Call it a crash course in economics or whatever else u want but I totally disagree with this this mine and yours mentality.
Now would I just give money away to a sibling for nothing or support a bad habit of theirs.....NO!!!! But at the same time I despise the individualistic attitude and lifestyle that many of us lead to....maybe I am old fashioned but I still prefer the all for one and one for all family structure I was raised in

That's my last word on this topic ..LOL cheers

Z

 

[HotWls]

I sell my old cars to my brother usually under current market value. We agree on a price and I tack on $500 for interest and make sure Im either the lien holder on the title or I still hold the title until the amount is paid off. We have done this three times so far and it's worked out great. There's no contention, and he knows me well enough to know that I will repo the car if needed.

This way, im helping my brother out, he's helping me out and I have covered my bases without being an ass upfront or taking advantage of each other. I have that clause in there for later. :smile:

 

[Vega$ NSX]

In a word, no.

It's not about the money. Everyone goes though bad luck, hard times, difficulties, etc. it's the lessons we learn to get through those times that makes us stronger, smarter and a better person. By helping him, you only deprive him of an opportunity to figure out how to get out of a hole by himself.

If you really want to help him, then how about you just buy a car in your name and he can make lease payments on it. If he doesn't pay, you keep the car. If he makes enough lease payments to your satisfaction, then just give him the car.

 

[Ultraman]

I think it's great that you're thinking about helping out your brother. He's still in college and this situation is not caused by he did anything bad or stupid. His car was hit by another car and I would say if he needs that 3K just be a nice brother and lend him the money - provided that you're OK never seeing that money coming back to you.

 

[Midnight_Raven]

This seems like a no brainer since your saying he has a low paying job and he's busy with school/work. Don't lend him money just recommend that he buys a cheap used car, so he can have extra cash in his pockets. It doesn't seem like he's really saving much either way, so extra cash in his name is probably the best thing he can do for himself. We all know how expensive school is so it would only help him out.

He doesn't need a 12K car he can buy a used 2-4K car just fine for college and have an extra 4-6K extra in his pockets. My first car cost me 3K and that lasted me years. Currently my daily driver is a 1993 Accord cost me 1K and so far all I've done is purchased 4 new tires for it. It may be a downgrade to his standards but really I think this situation is a no brainer just have him buy a cheap used car that in decent shape. Pocket the rest.

 

[flaminio]

My younger brother is in his early 20's and has one semester of college left. A clueless tourist in a volvo ran a red light and likely totaled his 2007 civic; he'll get $8-9k for it. I'm considering loaning/giving him ~3k so he can get something fairly new and reliable.

Don't do it. He's getting $8K+ already; he can find a car for that amount. Money will drive a wedge in your relationship. $8,000 will even get him a pretty decent car -- you don't even want to know what kind of crap I drove when I was in my early 20s.

 

[stevieray122854]

Don't do it. He's getting $8K+ already; he can find a car for that amount. Money will drive a wedge in your relationship. $8,000 will even get him a pretty decent car -- you don't even want to know what kind of crap I drove when I was in my early 20s.

Agreed. Hell, I saw a primo '94 Lexus LS400 with <90K miles for sale on cars.com the other day for $4300. Thought about buying it myself. He should have NO problem finding a good used car with $8K, just make sure he does his due diligence.

 

[nsxotic911]

I loaned my brother 3K to buy my Mercedes.. I also let he and his wife rent from me.. Then he and his wife lost his job and the Mercedes engine blew up.

Now they owe me at least 4K, after giving them significant credits for some house maintenance, help in selling stuff etc..

Never doing it again.

Don't do it. He can live just fine on a $5,000 car. My daily driver is a 1995 Toyota Corolla I have about $3,000 in.

 

[Gansan]

IMO, as many others have said, this doesn't seem like the right situation to lend money. Getting a better car is not really a good reason. If it were to help with medical bills, or helping with legal problems, getting laid off or similar dire straits, then I would be generous with the help, and I would do it as a gift and not expect payback. But not this situation.

However, I think only you can judge because you know your brother and the actual situation. We are only being backseat drivers.