How to help someone overseas looking for small investment?

LearnMS

Level 2 Member
I have a relative who has a daycare business overseas. He's looking for investors to pool in $25k loan that he'll return back within 3 months.

I feel that this can be done with a 0% APR credit card, but may not work overseas. Are there any other ways to help him in MS world? The traditional way is to ask friends to invest and will get back in a few months (like Kiva minus risk).

I am new to this, but feel like there's a better way. Thoughts?
 

notalent

Michael Bolton
Sure, do the vgc->mo->bank and transfer to relative. Get a 12mo 0% interest card and transfer it there. That's one way if you don't have the cash to give the relative.

I can come up with more ways this can go wrong than right though, so I would be very hesitant loaning money unless you trust this person 100%
 

LearnMS

Level 2 Member
Sure, do the vgc->mo->bank and transfer to relative. Get a 12mo 0% interest card and transfer it there. That's one way if you don't have the cash to give the relative.

I can come up with more ways this can go wrong than right though, so I would be very hesitant loaning money unless you trust this person 100%
Thanks. I can trust this person. The way I see it, it's like Kiva loans with minimal risk. And the turnaround is only 3 months. Max end of the year. I don't have 25k sitting around with me. Nor the 0% APR card. Don't want to open one just for this, dinging my score and count towards 5/24.

But if I do have a card with 0% APR, then should I call the card CS and ask to send me cheques that the relative can use it? I don't even know if he can pay the loan using credit card. It would be nice if Chase Ink plus card with 0% APR is a reality....
 

Matt

Administrator
Staff member
Considerations:

If you were to use cheques you wouldn't earn points.
Your risk may be higher than Kiva.
If you do not document the loan and charge interest you may run afoul of IRS regs on interfamily lending https://www.law.cornell.edu/uscode/text/26/7872

Personally, the most important aspect to be concerned about is their ability to repay. $25K in 3 months is a large amount of money in a short amount of time for someone who doesn't have their own credit. IE, I would be wary of someone who tells you they can flip the repayment around so quickly but who also needs to ask you, vs a bank, for the funds. It's a red flag leaning towards the very real problem with lending to family members.. that you are about to open a real can of worms and not be repaid.

I would consider backing out of the offer citing the valid reason of interfamily loan complications.
 

LearnMS

Level 2 Member
Considerations:

If you were to use cheques you wouldn't earn points.
Your risk may be higher than Kiva.
If you do not document the loan and charge interest you may run afoul of IRS regs on interfamily lending https://www.law.cornell.edu/uscode/text/26/7872

Personally, the most important aspect to be concerned about is their ability to repay. $25K in 3 months is a large amount of money in a short amount of time for someone who doesn't have their own credit. IE, I would be wary of someone who tells you they can flip the repayment around so quickly but who also needs to ask you, vs a bank, for the funds. It's a red flag leaning towards the very real problem with lending to family members.. that you are about to open a real can of worms and not be repaid.

I would consider backing out of the offer citing the valid reason of interfamily loan complications.
Hi Matt,

Thanks for the insights. I don't plan to fund all 25k, but just 5k. I am soliciting other friends who can help cover the rest. And I don't plan to charge any interest either. 5k within 3 months makes sense, but I haven't done it before.

Would you still advise backing out?
 

heavenlyjane

Level 2 Member
Hi Matt,

Thanks for the insights. I don't plan to fund all 25k, but just 5k. I am soliciting other friends who can help cover the rest. And I don't plan to charge any interest either. 5k within 3 months makes sense, but I haven't done it before.

Would you still advise backing out?
It's not simply $5K within 3 months, it's $5K to each lender within 3 months.

As long as you are willing to losing $5000 and risk potential damage to your relationship with your overseas relative and the friends you convince to buy in, you are fine. Personally this is more risk than I'd be comfortable with.
 

Matt

Administrator
Staff member
Hi Matt,

Thanks for the insights. I don't plan to fund all 25k, but just 5k. I am soliciting other friends who can help cover the rest. And I don't plan to charge any interest either. 5k within 3 months makes sense, but I haven't done it before.

Would you still advise backing out?
Oh lordy.. that is worse. As @heavenlyjane states:
risk potential damage to your relationship with your overseas relative and the friends you convince to buy in
You're about to step into a risk zone where you don't just burn up that relationship with overseas, but you also harm maybe 4 others here when the person you are soliciting for falls through.

If you consider lending as a business (and move on from this example) the interest charged is intended to offset the risk element. You need to charge X% to earn enough money to cover defaults and problems that are caused by the loan. If you charge 0% and also bring in other lenders then you are putting yourself into the fulcrum point. All that can happen, at best, is that you walk away unscathed. You can't really 'profit' from the encounter, and you are risking a matrix of relationships in the process.

The person who is seeking funding has problems. $25K sounds like a lot of money, but it should be chump change to anyone who thinks they can flip it around in 3 months. Trust me on this. If they can't cover it themselves it is because they have red flags on their ability to repay a 'proper' loan. If they can pay it themselves and are coming to you for better rates, you are eating all that risk for $0 and you can't win from this.

This is credit card money (not you using yours.. them using theirs) I know to some $25K in credit card line of credit sounds high.. but that isn't the key, it is the loan duration. If you have a 3 month loan duration then that is a credit card, you get 1 month 'free' and you pay 2 months of interest, and you exit. If they can't cover that themselves, they are a credit risk. If they cannot walk into a bank/apply online and receive $25K in credit then it is because they can't be trusted to repay it, don't make the mistake that the bank wouldn't make, and don't bring your friends in to it, because when it goes wrong, they will blame you.
 

LearnMS

Level 2 Member
Thanks all!

I concur with your thoughts. After probing further, I gathered that he applied for a loan from the bank which will take 3 months time to access 25k. But he needs that 25k now for operations. Hence the request.

Irrespective of whatever maybe, I will stay away.....I wanted to help though, but just didn't know what it entails....
 

ashishsg

a$]-[u
Thanks all!

I concur with your thoughts. After probing further, I gathered that he applied for a loan from the bank which will take 3 months time to access 25k. But he needs that 25k now for operations. Hence the request.

Irrespective of whatever maybe, I will stay away.....I wanted to help though, but just didn't know what it entails....
Good decision, bank loan can not be used to pay you off. They will monitor and disburse money only for agreed expenses.
 
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