05 Sep
Posted by author as Credit and Debt, Family And Money, Mortgages
Instead of sending the average joe to the moon, Richard Branson started taking on a much less glamorous endeavor. One of his many Virgin offshoots called Virgin Money, has put together a peer-to-peer lending system for families. You can visit the site here.
The products they offer are mortgages, business loans, student loans, and personal loans. Branson uses tactics to sell the product by encouraging you to “keep the wealth in the family”, and he promises better interest rates, because your friend or family member sets the interest, not some corporate bank. Sounds like a pretty good deal, right?
I think this is a horrible idea, and I don’t think Branson thought this one through. It’s a good idea to make lending from a friend or family member more formal, but that’s exactly why I hate the idea. Just the simple fact of borrowing money from a loved one flaws the relationship, but now that Virgin turns your friend or family member into a full-fledged bank, that’s a bad thing. I’ve never advised anyone to borrow money from their parents, grandparents, friends, or siblings. The reason is that it makes it so much harder to sit down for Thanksgiving dinner or hang out with that friend, when you know that you owe him or her money. Mixing business with pleasure never ends up positive, because a family or friend relationship should never be treated like a business. The moment that you start treating it like a business is the moment that the relationship becomes flawed.
Frankly, I’m not sure how Richard Branson became a billionaire, but he’s the billionaire, and I’m not, so he obviously knows what he’s doing as a businessman. Recently, everything he’s started has failed, and I think this endeavor will fail as well. I understand the other side of this argument. Some people have a hard time borrowing money from traditional sources, and family or friends can help someone out of a bind who needs the money. But, there are very few situations where the need to borrow money is a life or death situation. Borrowing from someone you have an intimate relationship with should be the last resort.
3 Responses
Steve Rabago
September 7th, 2008 at 4:02 pm
1I think your right that RB may not have this one right. I think he is making interfamily more formal and structured than the way than the way is really works. I think he is right regarding market. ZimpleMoney wil be competing in the family and friend market - and keeping it more family friendly.
Meg
September 10th, 2008 at 7:19 am
2I have to say I totally disagree with you here. Why not borrow money from family? In fact, why not lend money to family if you are able? I don’t agree with handouts. By having a formal agreement and including interest in the deal everybody wins. I would dearly love to be in the position to lend money to people I love so they can achieve their dreams, and I am so appreciative that my parents have lent me money from time to me to help me achieve mine.
I don’t believe there is any reason for the relationship to become strained if you owe money to someone. Why be embarrassed? Or ashamed? What is it about money that makes it such a taboo subject?
I think the more open and honest we are about our finances the better. The more we talk money the more we learn about how to manage it. By borrowing/lending amongst the people we love we are keeping money in our hands rather than in the hands of multi-national corporations who don’t have our best interests at heart.
author
September 11th, 2008 at 9:15 pm
3Meg,
I don’t think it’s a horrible thing to lend money or borrow money from your parents, friends, or other family members, but I definitely think that it complicates things. There is a proverb in the Bible that says that, “The borrower is slave to the lender”. I truly believe that, because I definitely feel like a slave to the bank or credit card company that i owe money to, because they have some control over my life.
When a friend or family member lends you money, things change, whether you want them to or not. Every time you go on a vacation while still owing your parents money, you better believe they are taking note of that. Every time you go out with your friend that you money to and spend a bunch of money on entertainment, you better believe they are taking note of that. I would rather keep my friendships and family relationships purely personal and not interject business into them.
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