Taking out another loan to help family member

[phillyza]

I'm sitting with a huge headache and I don't know what to do so I revert myself to this forum.

A little background. I just bought myself a 2nd hand car and got car finance for approximately R200 000.I already have an existing personal loan that I'm currently paying each month but no home loan and no other major Credit as I'm trying to pay off all credit like accounts and credit cards every month.

My sister in law contacted me today as she saw 2 adjacent empty plots that is for sale for R60 000 in a small town in the Free State. So she wants to borrow this amount from me to buy the plots as she wants to build a house for herself later on on these plots.

She is currently under debt review and can not take out a loan. Also the rest of her family members can not assist either. She is currently working in Oman earning a good salary and she will be able to pay me back R5000 every month.

So my question is should I take the risk in borrowing her the required amount by extending my personal loan and how would it affect my credit rating and how will it influence my rating if I want to buy a house within the next year or two? I know she will be able to give me the money every month but I'm worried about my credit rating in the event I want to take out a home loan. Help!!

 

[HavocXphere]

Definitely high risk - borrowing is bad, borrowing for someone else twice so...and its not even an asset giving you any benefit.

Whether the risk is acceptable though would in my mind largely depend on the personal qualities of said sister.

Given that she is already in debt review I'd reckon that she can't be relied on in terms of managing money and I would not recommend taking the loan.

 

[Chevron]

Well what I suggest is buy the plots in your name. Tell the family member when they pay up they can have the deeds.

If you don't do it like that you'll never see the money again.

Land is never a bad thing to have in your name.

 

[phillyza]

Well what I suggest is buy the plots in your name. Tell the family member when they pay up they can have the deeds.

If you don't do it like that you'll never see the money again.

Land is never a bad thing to have in your name.

Thank you. I like this idea. So how do you go about. Apply for a home loan for R60 000 at a bank?

 

[HavocXphere]

Just make sure you've got an actual plan for the land...

 

[Spliffcat]

What town? may I ask.

 

[Rockhound]

Well what I suggest is buy the plots in your name. Tell the family member when they pay up they can have the deeds.

If you don't do it like that you'll never see the money again.

Land is never a bad thing to have in your name.

+1
This is the only way I would even consider it.

Thank you. I like this idea. So how do you go about. Apply for a home loan for R60 000 at a bank?

Go to your bank and speak to a consultant about what they require.
In my case it was:
- A signed offer to purchase subject to getting finance.
- Three month pay slips.
- And lots of forms that I had to fill in at the bank.

You can also do home loan application online or over the phone nowadays.
Shop around for the best interest rate.

 

[ndleje]

I tend to agree with HavocXphere, this is a not a good idea though the deed maybe good. In a year of her repaying it back a loy can go wrong and thus jeopardise your relationship.

 

[Seriously]

I can relate many stories and experiences relating to me helping my family members financially at the expense of myself and my own family and how I always ended up the loser. BUT surprise when I were in need NONE of them were prepared to help me at all even those that could that benefitted from my help before. So no it's not a good thing and they will probably never be there for you when the roles reverse. Money is a bastad and it changes the character of many individuals even or especially family.

 

[DerpiesFreud]

I tend to agree with HavocXphere, this is a not a good idea though the deed maybe good. In a year of her repaying it back a loy can go wrong and thus jeopardise your relationship.

I learnt an important lesson about loaning money,never loan something to someone unless you`re prepared to lose it forever.

I like the idea of having the property in your name then handing over the deed once the amount is settled

 

[Lycanthrope]

Money is a bastad and it changes the character of many individuals even or especially family.

Disagree. It shows them for who and what they really are.

 

[Sensorei]

Brilliant advice from Chevron. That's what I would do after doing some research on the plot to make sure it'll be a decent investment.

 

[SauRoNZA]

Not a chance in hell I would make credit in my own name to help someone else's supposed credit problem.

Sounds like an absolute bull**** story anyway.

If she can pay you R5000 a month then why is she under review? And if she is apparently earning so well in Oman why does she care about two plots in South Africa?

And why two plots instead of just one? Surely if you have a credit problem then one would be enough, or better yet none at all.

 

[D3nz]

Well what I suggest is buy the plots in your name. Tell the family member when they pay up they can have the deeds.

If you don't do it like that you'll never see the money again.

Land is never a bad thing to have in your name.

^^ Absolutely this! Don't even be tempted to proceed with the original proposition.

 

[phillyza]

Thank you all for the valuable input. I like the idea of getting the plot in my name. To get back to my original question. Would it effect my credit rating negatively by applying for a home loan now, after already having a personal loan and a vehicle loan? Is it perhaps a good idea to get the home loan now for these plots as it will assist me later on with my own home loan when I want to buy a house in a year or two? And lastly, is it better to get a home loan on the plots rather than just extending my personal loan?

 

[GhostSixFour]

AFAIK once you've bought your first property, your chances of getting 1005 loan for any property there after is basically nil. So bear that in mind..

 

[phoneJunky]

Thank you all for the valuable input. I like the idea of getting the plot in my name. To get back to my original question. Would it effect my credit rating negatively by applying for a home loan now, after already having a personal loan and a vehicle loan? Is it perhaps a good idea to get the home loan now for these plots as it will assist me later on with my own home loan when I want to buy a house in a year or two? And lastly, is it better to get a home loan on the plots rather than just extending my personal loan?

The only thing that really effects your credit rating badly is if you have a loan and don't pay. I think the more debt you service regularly actually helps your credit rating more (ironic in my opinion, but it shows the debtors that you can repay on a regular basis).

 

[bwana]

My sister in law contacted me today as she saw 2 adjacent empty plots that is for sale for R60 000 in a small town in the Free State. So she wants to borrow this amount from me to buy the plots as she wants to build a house for herself later on on these plots.

She is currently under debt review and can not take out a loan. Also the rest of her family members can not assist either. She is currently working in Oman earning a good salary and she will be able to pay me back R5000 every month.

Why can't she just wait 12 months and buy the plots herself? Or six months and buy just one?

On the other hand shouldn't she be using that R5000/pm to get out from under her existing debt?

 

[P924]

Lets put it this way - if the bank is not willing to give them a loan, then why would you. If they have proven in the past that they do not repay loans (debt review), why would they repay you. Do you even know that they will be using the money to buy land, or just take it and run? There is absolutely no way I would lend anybody money that I don't have.

 

[w1z4rd]

Yeah, if you going to do that, keep the property in your name until you have your money back.