Friends and money don't always mix

For many years, I had a secret identity. I was “Susan” of the MMI’s “Ask Susan” advice column. The truth of how this came about is far less exciting than it seems—I inherited the column from someone named Susan. After answering more than 30,000 questions, I “retired’ from the column. Today, the column is called The Advice Team and questions are answered by some of the most qualified people in the industry. Thankfully, I still get to fill in when one of them goes on vacation because I really love talking (or in this case, typing) with people one-on-one. During my most recent stint as a substitute, I noticed that several people were worried about how their personal relationships are being negatively impacted by money. In case you are struggling with the topic of friends and finance, following are a few of the questions I received and answered.

Dear Advice Team: I let my friend and his wife borrow $2,500 more than a year ago. They are making payments as agreed, but I can't help to get annoyed when I see them spending money frivolously. They even went on a trip recently—I can’t even afford to do that! What can I do about this situation? -Steve, Minnesota

Steve: While you may not agree with all of their spending decisions, at least they are keeping their promise to pay you back. I believe that when you lend someone money, it is important not to assume a position of power. Being too authoritative could damage your friendship.

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Dear Advice Team: In October, I loaned my friend of 12 years $4,000. I wrote her a personal check for the amount of the loan. She verbally agreed to pay me back all of her income tax refund. Well, she got her income tax and spent it all, without notifying me. I called her and she said that she would pay me $100/week until balance was paid. That was three weeks ago and I haven't heard from her. I am a single parent and trying to go to school. She knows I need it. What can I do? -Cheryl, Phoenix

David: I am sorry you are dealing with this delicate issue. Since your friend has not kept her end of the bargain, it is past time that you begin treating the loan like you would any other business matter. Discuss the terms of the agreement and put the details in writing. Be sure to list both parties involved, the interest rate, due dates, payment amounts, and penalty for late or missed payments. Document the date and time of any letters or phone calls, and be sure to make note of all the responses to your attempts. Your records may be necessary if you plan to take the matter to court, or if you plan to write the debt off as non-business bad debt on your next tax return.

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Dear Advice Team: I recently co-signed for a car loan for a friend. This "friend" has duped me and she won't pay. My question is: how can I get my name removed from the loan? I don't want to pay for a car for her. Her name is on the title and she has a car free of charge! I have learned my lesson; I just want to know what can be done—before my credit is ruined. -Mark, Tennessee

Mark: Helping someone obtain their goals can be very rewarding; however, far too many friendships end when money is involved. Unfortunately, there is no simple way to “remove” your name from a cosigned loan. In order for the primary borrower to assume total responsibly for the debt, she would have to apply for a new loan and qualify on her own. (I am assuming that this is not possible or you wouldn’t have been asked to cosign in the first place.) Talk to your friend about selling the car and repaying the loan. Seek mediation if necessary. If this is not possible, you might consider protecting your credit rating by making the payments to the creditor yourself and then collecting from her. Because the stakes are so high, I recommend that you seek legal advice to understand your rights and responsibilities.

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If you have a question for the Advice Team, please don’t hesitate to ask!