• Go to page :
  • 1 234
  • Text Only
Voting History
rated:
Hi,

I'll start with a little background of anything that could be relevant in providing a reference point:

Age: 27
Income: about 90k a year plus 20k a year or so in bonus. Both income and bonus likely to increase somewhat steadily.
Savings: 73k currently earning .8% (Realize this is high relative to retirement number - a definite mistake on my part)
Retirement: 20k

Now to my question:

My girlfriend (who I am living with) has about 150k worth of loans (Med School) mostly at 6.8% with some amount at 8% or so (I think these being the private loans). I would like to try to set something up that would be mutually financially beneficial in the short term and would save us money in the long term if we should get married. The idea being that 8% and even 6.8% is a lot more than I can currently get on my savings in the bank so I would like to "invest" some of my money into her loans.

The thought I had would be that I would loan say 20k to my gf which she would then use to pay of the highest interest loans. She would pay me an interest rate between 0% and 8% - lets say 5% which would give me a good return on my money and still save her on interest. And eventually should we get married we will have saved the entire 8% by taking the bank out of the equation now. Assuming this plan is legal - what would be the best way to go about implementing such a loan? Anything else I should consider? Any better ways of doing this?

I realize one major consideration is that there is built in risk in loaning to a gf ("Don't loan friends or family money if you're not prepared for it to be a gift" and all that ). I'm certainly interested to hear your thoughts on this end and any steps I should consider. That being said I'm more curious about any advice you all would have concerning the details of the loan/investment itself assuming I'm willing to take the risk.

Appreciate any and all input you can give me!

PS - I apologize but gf will not let me post pics. Sorry!

Member Summary
Most Recent Posts
It would be troublesome for me to have sex with a business partner. I guess it will make the divorce that much easier. B... (more)

delzy (May. 14, 2012 @ 1:06p) |

I think this varies a great deal depending on the people and the relationship. I seem plenty of couple friends who made ... (more)

TYH3 (May. 14, 2012 @ 6:42p) |

You made the right move. My wife was dating some dude in college who agreed to co-sign her student loans since her pare... (more)

ceobeaver (May. 15, 2012 @ 12:47p) |

  • Also categorized in:
Thanks for visiting FatWallet.com. Join for free to remove this ad.

Green for asking the GF about posting her pic before posting your thread

Vote for next thread from OP

1. My GF is spending money on things and not paying back the loan
2. My ex GF won't pay back loans. How do I collect?
3 - Other. Be inventive

Watch a few episodes of Judge Judy and you will have your answer.... i.e. DON'T DO IT !!

ellory said:   Vote for next thread from OP

1. My GF is spending money on things and not paying back the loan
2. My ex GF won't pay back loans. How do I collect?
3 - Other. Be inventive


#1 is certainly possible but not likely - I wouldn't have considered this plan if I didn't currently trust my girlfriend. But if you have suggestions on how to remedy 1 or 2 (2 seems more probable since its farther down the line) I'm all ears. Otherwise I'll certainly consider them as the risk in this investment as I mentioned. And if it doesn't turn out well I promise to come back and post the experience for others to learn from.

Either "we" are using "our" savings to pay off "our" debts, or you let her deal with her own loans and find somewhere else to park your savings. Expecting a girlfriend to make a monthly payment to you has so many, many things that can go wrong. Yes, it's "legal", but there's no way to ensure it doesnt become a huge headache. Not to mention this isnt random throw-away money you wont miss, this is eggs-in-one-basket house downpayment type money that'll almost put you back to step one for your financial security if you dont get it back.

You only have $73k anyways - go open a couple rewards checking accounts and net yourself 3%, the hassle of making 30 debit purchases/month will be well worth the hassle you'll be avoiding with the girlfriend.

Assuming you are well aware of the pitfalls of mixing personal and business relationships, this could work in your (both) favor. Some things to consider:

Possible tax deduction the GF would lose (dont know if she would even qualify for it).
Would you be willing to take her to court to collect the loan, if things dont work out. Would you be able to treat this as a gift?
Can you set this up through prosper or something similar to formalize the arrangements (I dont know what the added cost/benefit is but something to consider).
You will owe taxes on the interest she pays you but she wouldnt get to deduct it on her taxes. If you get married, this all will be a wash.

Student loans not being dischargeable in bankruptcy, this gives her an opportunity to refinance from a loan she can't default on to a loan she can default on - namely, her loan to you. This is a great deal for her, and a terrible, terrible deal for you. no matter how well documented the loan is, if she stops paying you, there will be almost nothing you can do. If you were goiong to do this, it would be better to strike this deal with a complete stranger, even though that would still be a disastrously bad idea.

I applaud your well-intended efforts, but mixing finances with a gf/fiance/significant other is not a good idea. You're still relatively young, worry about this if and when you marry her.

uutxs said:   Assuming you are well aware of the pitfalls of mixing personal and business relationships, this could work in your (both) favor. Some things to consider:

Possible tax deduction the GF would lose (dont know if she would even qualify for it).
Would you be willing to take her to court to collect the loan, if things dont work out. Would you be able to treat this as a gift?
Can you set this up through prosper or something similar to formalize the arrangements (I dont know what the added cost/benefit is but something to consider).
You will owe taxes on the interest she pays you but she wouldnt get to deduct it on her taxes. If you get married, this all will be a wash.


About the taxes - would it really be a wash? As I see it any tax I pay is lost since she doesn't get an equivalent benefit. Its obviously still an improvement over nothing but still something to consider.

OP, I know you want advice assuming you are willing to take the risks. Just one question: If break up with her 6 months from now, are you confident she will still be paying you back 2, 3, 10 years from now? I think you understand what you think the risks are, but I'm not convinced you fully understand what the risks are to start with.

br435 said:   uutxs said:   Assuming you are well aware of the pitfalls of mixing personal and business relationships, this could work in your (both) favor. Some things to consider:

Possible tax deduction the GF would lose (dont know if she would even qualify for it).
Would you be willing to take her to court to collect the loan, if things dont work out. Would you be able to treat this as a gift?
Can you set this up through prosper or something similar to formalize the arrangements (I dont know what the added cost/benefit is but something to consider).
You will owe taxes on the interest she pays you but she wouldnt get to deduct it on her taxes. If you get married, this all will be a wash.


About the taxes - would it really be a wash? As I see it any tax I pay is lost since she doesn't get an equivalent benefit. Its obviously still an improvement over nothing but still something to consider.

I said, IF you get married, this would be a wash, since there is no real "loan" between the two of you at that point --- I am assuming finances are all co-mingled, you file MFJ etc.

FarmerOak said:   OP, I know you want advice assuming you are willing to take the risks. Just one question: If break up with her 6 months from now, are you confident she will still be paying you back 2, 3, 10 years from now? I think you understand what you think the risks are, but I'm not convinced you fully understand what the risks are to start with.

My assumption is that if we were to break up I won't get a cent of the money back. I say that not because I think so poorly of my girlfriend but because I think this of my potential future girlfriend who I've broken up with (who's likely to be a significantly different person than who I'm currently dating). The idea to make this a loan was primarily to avoid having to pay something like a gift tax if I were to just hand her a check for the amount - not really about being able to collect.

Terrible horrible awful idea.

Move your savings into retirement accounts instead. It may take a few years.

ellory said:   Vote for next thread from OP

1. My GF is spending money on things and not paying back the loan
2. My ex GF won't pay back loans. How do I collect?
3 - Other. Be inventive



3. My GF dumped me for a rich doctor and left me hanging for the loan.

She's already living with you...have her apply the rent she should be paying towards her loan if you are really worried about this. Then you are only in on her loan as long as you are together.

br435 said:   FarmerOak said:   OP, I know you want advice assuming you are willing to take the risks. Just one question: If break up with her 6 months from now, are you confident she will still be paying you back 2, 3, 10 years from now? I think you understand what you think the risks are, but I'm not convinced you fully understand what the risks are to start with.

My assumption is that if we were to break up I won't get a cent of the money back. I say that not because I think so poorly of my girlfriend but because I think this of my potential future girlfriend who I've broken up with (who's likely to be a significantly different person than who I'm currently dating). The idea to make this a loan was primarily to avoid having to pay something like a gift tax if I were to just hand her a check for the amount - not really about being able to collect.

You will not owe any gift tax. Any amount over the annual limit (~13k?) can be applied towards the lifetime exemption. You may have to file some forms but no gift tax will be owed. Text

If you don't think she'd pay if you break up then dump her now.

br435 said:   ellory said:   Vote for next thread from OP

1. My GF is spending money on things and not paying back the loan
2. My ex GF won't pay back loans. How do I collect?
3 - Other. Be inventive


#1 is certainly possible but not likely - I wouldn't have considered this plan if I didn't currently trust my girlfriend. But if you have suggestions on how to remedy 1 or 2 (2 seems more probable since its farther down the line) I'm all ears. Otherwise I'll certainly consider them as the risk in this investment as I mentioned. And if it doesn't turn out well I promise to come back and post the experience for others to learn from.


And then you will post her pic?

elektronic said:   She's already living with you...have her apply the rent she should be paying towards her loan if you are really worried about this. Then you are only in on her loan as long as you are together.

This seems to be basically the same as my idea but with no immediate benefit to me and more of an over-time investment (basically I invest her rent amount per month). Certainly an idea since the primary benefit assumes we eventually get married.

br435 said:   
I say that not because I think so poorly of my girlfriend but because I think this of my potential future girlfriend who I've broken up with (who's likely to be a significantly different person than who I'm currently dating).


Does your potential future girlfriend who you've broken up with let you post pics?

Scifiguy123 said:   br435 said:   ellory said:   Vote for next thread from OP

1. My GF is spending money on things and not paying back the loan
2. My ex GF won't pay back loans. How do I collect?
3 - Other. Be inventive


#1 is certainly possible but not likely - I wouldn't have considered this plan if I didn't currently trust my girlfriend. But if you have suggestions on how to remedy 1 or 2 (2 seems more probable since its farther down the line) I'm all ears. Otherwise I'll certainly consider them as the risk in this investment as I mentioned. And if it doesn't turn out well I promise to come back and post the experience for others to learn from.


And then you will post her pic?


I can neither confirm or deny that since she may read this post...but that does seem only fair, right?

motuwallet said:   If you don't think she'd pay if you break up then dump her now.

This is silly. I think she would pay but I also don't think we'll break up. If we assume I'm wrong about the latter I just don't see any reason to think I'll be right about the former.

uutxs said:   br435 said:   FarmerOak said:   OP, I know you want advice assuming you are willing to take the risks. Just one question: If break up with her 6 months from now, are you confident she will still be paying you back 2, 3, 10 years from now? I think you understand what you think the risks are, but I'm not convinced you fully understand what the risks are to start with.

My assumption is that if we were to break up I won't get a cent of the money back. I say that not because I think so poorly of my girlfriend but because I think this of my potential future girlfriend who I've broken up with (who's likely to be a significantly different person than who I'm currently dating). The idea to make this a loan was primarily to avoid having to pay something like a gift tax if I were to just hand her a check for the amount - not really about being able to collect.

You will not owe any gift tax. Any amount over the annual limit (~13k?) can be applied towards the lifetime exemption. You may have to file some forms but no gift tax will be owed. Text


Thanks for the info! This is why I love this forum. That seems a lot simpler, avoids paying tax on the "interest", and leaves me with essentially the same risks.

It really depends. But if she is living with you, and knows about your savings, is she almost expecting you to do this? Or is this something she does not know about and was all your plan?

You better be careful on how all came about, because she might take it as you do not see her as a future potential wife if you go full legal on the loan documentation. Also, I would think that anything over 3-4% might be considered too much by her based on current savings at .8%, you would be more than quadruplying your savings interest.

So your most likely possible outcomes are the following:

1. She is offended, takes you up on the offer and breaks up with you within the year. You are out x/y amount.

2. She marries you and you end up paying the full amount of the loans after you combine your assets. You are out y amount.

3. Do not bring it up and keep learning about each other until breaking up or marriage.

Either way you are out of dough if it already has been brought up or you end up getting married. Hopefully this amount in loans bought her a good education to get a well paying job.

Why don't you just wait until you marry her, and then just pay off the loan then?

br435 said:   Thanks for the info! This is why I love this forum. That seems a lot simpler, avoids paying tax on the "interest", and leaves me with essentially the same risks.
If it is really a loan (you expect GF to pay interest and repay the principal eventually), treat it as such. It is NOT a gift.

If you want to make it a "gift" but collect interest/principal under the radar, you could be in for a lot of pain. Not the least of which would be your ability (lack thereof) to sue, if GF defaults on the "gift".

br435 said:   PS - I apologize but gf will not let me post pics. Sorry!

So she's in debt AND she isn't any fun? I think you should dump her and save yourself a lot of time & money.

br435 said:   uutxs said:   br435 said:   FarmerOak said:   OP, I know you want advice assuming you are willing to take the risks. Just one question: If break up with her 6 months from now, are you confident she will still be paying you back 2, 3, 10 years from now? I think you understand what you think the risks are, but I'm not convinced you fully understand what the risks are to start with.

My assumption is that if we were to break up I won't get a cent of the money back. I say that not because I think so poorly of my girlfriend but because I think this of my potential future girlfriend who I've broken up with (who's likely to be a significantly different person than who I'm currently dating). The idea to make this a loan was primarily to avoid having to pay something like a gift tax if I were to just hand her a check for the amount - not really about being able to collect.

You will not owe any gift tax. Any amount over the annual limit (~13k?) can be applied towards the lifetime exemption. You may have to file some forms but no gift tax will be owed. Text


Thanks for the info! This is why I love this forum. That seems a lot simpler, avoids paying tax on the "interest", and leaves me with essentially the same risks.

Well, that actually eliminates all the risk - there's no risk of not getting repaid if there's nothing to be repaid.

If you are ok with giving her a $73k cash birthday present, then by all means go for it. Just make sure your GF didnt have $200k in student loans until the previous boyfriend gave her a similar "gift", and that this wasnt the whole point of her relationship with you...

Beside the previous advise don't do it because GF and MONEY don't MIX. Some more things i thought of...

1) If she is getting deduction on the student loan interest, she would lose it now by paying it off early. You instead would report tax on the interest she would be paying you. So if you treat this as a combined deal since she is living with you, you lost out big on tax benefits together.
2) If you do want to proceed with this, you would draft a simple Promissory note which spells out terms like interest rate, payment terms, etc. (google is your friend) and then both party sign. This would come in handy if things go south.
3) I reallllllly realllllly strongly advise you not to do this. Girlfriend and money DOES NOT MIX. I think the poon is clouding your otherwise smart judgement.

How long till she is out of med school, I suppose 4 years of residency will be required after that too? How long have you been together? I wouldn't do any of this till married but she has some very high income potential. Can you collateralize the loan in any way? Perhaps her parents would cosign?

DamnoIT said:   How long till she is out of med school, I suppose 4 years of residency will be required after that too? How long have you been together? I wouldn't do any of this till married but she has some very high income potential. Can you collateralize the loan in any way? Perhaps her parents would cosign?

Starting residency this summer - 3 years. So yes - high income potential. Been together 2 years.

I don't think she has anything to provide as collateral and I don't have any interest in having this conversation with her parents (Not because they're unreasonable people - but they may not understand where I'm coming from as well as she does).

It seems like the general advice so far is "Wait till marriage" which certainly has a lot of sense to it. Keep it coming guys (assuming there's more we haven't covered) - really do appreciate your input.

Start a website "willmygfpaymeback.com"asking guys and gals to donate $1 and vote whether your gf will ever pay you back

When she defaults (not if) , you can give the latest iPad as a prize to one of the people who voted correctly

I don't think there has ever been a debt ridden gf in the history of the world who didn't use the generosity of a sucker to pay her bills

This is a truly terrible idea.

Signing a simple year-long lease with a g/f can be fraught. You're essentially wanting to commit to a many-years financial relationship with this woman. Bad, bad, bad move and a really risky way for you to earn a five percent return.

People are willing to burn bridges over much lesser amounts of money. If you want to help her out with the loans, then you're free to do so. If you're doing it as an "investment" under the assumption that your relationship is worth more than 20k to her, then I personally think it's a terrible idea.

I haven't read the post or any reponses, only the title of the thread.

My response.... no.

The best thing you can invest in your GF here is time, love and support as she works hard to pay off her debt - on her own.

BlueEyesAustinTexas said:   This is a truly terrible idea.

Signing a simple year-long lease with a g/f can be fraught. You're essentially wanting to commit to a many-years financial relationship with this woman. Bad, bad, bad move and a really risky way for you to earn a five percent return.


Interesting point. One thing to consider (just in terms of perspective) is that her portion of the lease is already 12k a year (NYC) so like you said I already have a significant financial...er...entanglement with her simply by signing a lease together.

does she pay rent?

Skipping 103 Messages...
You made the right move. My wife was dating some dude in college who agreed to co-sign her student loans since her parents weren't willing and he was in the workforce and had some credit. Needless to say he's now stuck with these loans on his credit report and even got hit with some lates when she failed to make the first few payments (before I entered the picture).

Of course, now I'm paying the loans so I'm not really sure who the real sucker is here... but at least I got the girl.



Disclaimer: By providing links to other sites, FatWallet.com does not guarantee, approve or endorse the information or products available at these sites, nor does a link indicate any association with or endorsement by the linked site to FatWallet.com.

Thanks for visiting FatWallet.com. Join for free to remove this ad.

TRUSTe online privacy certification

While FatWallet makes every effort to post correct information, offers are subject to change without notice.
Some exclusions may apply based upon merchant policies.
© 1999-2014