Mixing Friends with Financials

pernunz on 07/08/2015 - 16:22

A friends of mine has just bought a house, and has an offset account with redraw facilities. I have savings, currently in a low interest internet savings account.

I think there's a situation that can benefit the both of us, but it might need some sort of legal paperwork just to keep things alright if there's any ever downfall in the friendship.

(Figures just used for ease)
I have $10,000 that I don't need direct access to. At the moment, I'm currently earning approximately 3.5% interest. My friend has a mortgage, and is paying 5% interest.

Why don't I simply put the money in his offset account, then when there comes a time that I need it, he returns it to me and we split the difference.

Say after 1 year (ignoring any compounding) my savings of $10,000 would have only earned $350, whilst it would have saved my friend $500. At the end of the 1 year period, I "withdraw" my $10,425 from his offset account.

For the work of simply a couple of internet transfers, we've both come to a financial benefit of $75.

Financial

Comments

  • nocure on 07/08/2015 - 16:29
    +46

    Nope,no no nope.Definitely not.

    • spackbace on 07/08/2015 - 16:33
      +11

      As above, hell to the no! Not worth $75!

      • SimbaGirl on 07/08/2015 - 16:58
        +10

        Another "hell, no" vote here. For the love of God, don't mix financials with friends or family (ESPECIALLY family). All sorts of things can - and do - go wrong with financial arrangements, it's just not worth it.

  • aim54x on 07/08/2015 - 16:31
    +2

    It sounds good, but I would avoid mixing the financials with friends….just not worth ruining a friendship. Money makes people funny

  • ozhunter on 07/08/2015 - 16:32
    +4

    Not worth the trouble.

    • BigTed on 08/08/2015 - 09:00
      +2

      ^^^ This.
      The 'savings' would have to be WAY more than $75 each to make this worthwhile.

  • na8an on 07/08/2015 - 17:25
    +2

    Been there, causes too much hassle. So another NO!

  • [Deactivated] on 07/08/2015 - 17:47
    +1

    See: https://www.ozbargain.com.au/node/205527

  • Heizenberg on 07/08/2015 - 18:55
    +2

    just don't do it. ever.

    Seriously as simple as a plan may seem they always seem to find a way to end badly. (i know from experience)

    and like others said the savings aren't worth your time anyway

  • Davo1111 on 07/08/2015 - 18:59
    +3

    Not worth the trouble.

    Never loan money to friends, unless you have no intention of getting it back… ever.

  • ShamelessBargains on 07/08/2015 - 21:12
    +2

    Sounds like the big effort for such a small return. Legal paperwork alone would end up costing more than the $75 in interest you will gain.

    Maybe invest the $10k in shares, government bonds or something else for a higher return.

  • jelko on 07/08/2015 - 22:31
    +4

    You're going to risk $10,000 to earn an extra $75? Crazy stuff. Just stay home this weekend and bring your lunch to work next week and you'll easily be able to save more money with zero risk.

    Sometimes, I gotta wonder about Ozbargainers.

    • ozhunter on 07/08/2015 - 23:16
      +1

      The $10,000 is just used in the example.

    • jelko on 07/08/2015 - 23:33
      +3

      Well, if it's less then why even bother if you're going to earn less than $75. If it's more than $10k, then you must trust people more than I would. There's no way I'd be able to sleep at night with that amount of $ sitting in a friend's bank account.
      What happens if your friend dies? Who gets the money then? Is it in his will? Will his family get it? Will they give it back?
      Sorry, this is a bad, bad idea.

  • idjces on 07/08/2015 - 23:35
    +1

    In a similar situation with my long term gf, i have a mortgage, she has significant savings. We share access to almost every type of personal account, the only exception being our main bank accounts. Thats a line i'm not quite confortable with crossing. It might make sense financially to have such an arrangement. We live together, have a child together. But there's just too many stories of situations gone bad. We're only human, best not give ourselves that chance to succumb to the flaws that always end up playing out

    • chumlee on 08/08/2015 - 10:55
      +3

      You live together and have a child together but not willing to have main bank account together due to an issue that may or may not occur in the future?

      Seems strange to me as if you were unfortunate enough to split up and your GF had custody of your child you are financially going to be bending over and touching your toes.

      • idjces on 08/08/2015 - 13:41

        We have a seperate shared account, and our assets are fairly even if we were to split up

  • Eca1 on 08/08/2015 - 09:07
    +1

    Unwise. Keep your friend!

  • tomleonhart on 08/08/2015 - 10:26
    +1

    Don't do it. Money and friends don't mix.

  • cloudy on 08/08/2015 - 11:01
    +1

    As most said, don't do it. Unless u want to find out who ur true friends are.

  • SlickMick on 08/08/2015 - 12:58
    +1

    Don't do business with friends.

    Send me your money. I can either pay you interest monthly or whenever, our you can just get your interest with principal when you want your money back.

    We'll be careful to never become friends, so if things go wrong you have nothing to lose… well except your money I guess, but don't worry, what could go wrong?

  • Brainwhacker on 08/08/2015 - 16:48

    Be prepared to lose your friend and the money as your worst case scenario. The other outcome might be getting your money back but losing the friend. Not worth it for the amount, nothing wrong with the concept, you could use a promissory note with guarantors etc

  • cobbadan on 09/08/2015 - 10:06

    A lot of doom and gloom in here.
    For me it comes down to how good a friend you're talking about. I've lent money to two friends over the years, they paid it back and we're still friends.

    I'm now in a position where I'm considering getting into joint venture real estate investment with another friend.

    Depends on the numbers too, if you're talking about parking 50 - 100 K then the benefits would be pretty substantial.

  • WaywardOne on 09/08/2015 - 14:55

    Yeah similar situation as I am in — a relative of mine that is somewhat terrible at managing money has ended up with a significant credit card debt. Their rate of interest is ~20%, so I am tempted to lend them money at the 'low' rate of 11.75% ((3.5 + 20) / 2). It seems like a great idea with the one exception — if anything goes wrong (and it will), what is my recourse?

    • ozhunter on 09/08/2015 - 20:47

      if anything goes wrong (and it will), what is my recourse?

      If you know something will go wrong, why would you lend it? See if he can apply for a credit card with a 0% balance transfer.

      I guess you will end up suing him and going to court.

      • WaywardOne on 09/08/2015 - 21:22

        Yeah, it's one of those messy situations where they had credit cards approved, and then had a significant change in financial status (unemployed), so applying for more credit is out of the question.

        But yes you are right, if I'm smart I won't lend the money

  • fillit on 09/08/2015 - 20:21

    Don't do it, but if you must, put a caveat on the property, which will probably neglect any financial benefit of doing so in the first place.

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