My friend asked me to loan him £10,000

Harvey Jones needs your help. His friend Chris has just asked him for a £10,000 loan. He has the money and trusts his friend to pay him back. What should he do?

How far would you go to help a friend? That's a question I've been asking myself over the last week, and I still haven't come up with the answer. Perhaps some of you out there could help.

The distance I'm being asked to cover for my buddy is £10,000. I have enough fuel in my tank, but do I want to burn it up now, and on him?

A friend in need

I've known Chris since I was a university about 20 years ago, and like many old friends, we don't see each other regularly. We typically manage an annual catch-up beer or two in the run-up to Christmas, when we reassure ourselves that our youthful bond is still there.

That was why I squirmed with embarrassment when he asked if I could loan him £10,000 to put down as a deposit on his first home. He had found just the place, a one-bed flat in a slightly scummy part of east London costing £180,000, but with only £9,000 in savings he needed to double his deposit.

That was where I came in.

Financial affairs of the heart

Chris is 39 years old. He did part-own a property once, about five years ago, when he was living with his ex-girlfriend Helen. But after they broke up he sold his share to her, and has been renting ever since.

"Typical Helen. She always was lucky with money. She bought me out for £80,000 and our flat is worth £300,000 now."

"I thought you were over Helen."

"I am. It's losing all that money I can't get over."

I laughed. He was joking, I think.

"She's married now."

"So I hear," he says, glumly crunching a porky scratching, and I wanted to shift the subject away from Helen before he became even more morose. But I didn't want to shift it back to the £10,000.

Pub-editor

Things didn't go well for Chris after he left Helen (and as I have often reminded him, he left her). He wasn't ready for marriage and kids, he told her, and Helen clearly was, because she has both now, plus a very nice flat worth £300,000 that she rents out, after moving into her husband's house.

She has done a lot better out of the break-up than Chris. He drifted on, working as a sub-editor on a small business magazine, and renting, renting, renting, although he mostly lived down the pub. That's where his payout from the flat went.

But he has turned his life around in recent times, getting a promotion at work and assembling that £9,000. And now he has found a flat and wants his old Uni buddy to help him buy it.

"Come on mate, you're good for it. You'll get it back, with interest. Might take a year or two, but I'll see you right."

I reached for the porky scratchings.

The ultimate sacrifice

In wartime, people would lay down their lives for their friends. So why shouldn't I lay down £10,000 for Chris?

Part of me desperately wants to. Being honest with myself, I suspect there is a shred of vanity in that. I'm flattered by the notion that I've sorted my life out better than him, and now I'm a reliable and solvent grown-up who can lend a helping hand to others. A bit like a bank, but with tighter lending practices.

Perhaps I feel guilty as well, because like Helen, I've got a long-term relationship, a young child and a house, and Chris hasn't. Plus I'd feel a right tightwad for saying no.

And I would genuinely like to help him. At 39, it is about time he got his first flat. The responsibility of paying a mortgage every month might be good for him. He mentions he's seeing some girl he quite likes. I fear for her.

Beer money

So what's holding me back? I do have £10,000 sitting in a bank account earning a rotten 1.5%, and unless the economy tanks or my freelance income dries up in 2010: Year of Disaster, I don't need it just yet.

I can't imagine charging a friend interest, it's too embarrassing. But I would probably get the initial capital back, eventually, in dribs and drabs, with a bit of prompting. That might cause tension between us.

Chris is generous, he's always first to the bar to get his round in, although I would trust him more if he was more careful with his money.

He is also honest and well-meaning, I know he means to pay me back. I lent him £250 about 10 years ago, when he was behind on his rent. I got that back, eventually.

Price of friendship

Chris says he has spoken to a mortgage broker, and although he's a bit vague about the details, she can get him a variable rate mortgage at around 5.5%, if he can assemble that 10% deposit.

"That's 5% over base. Could you afford to repay that if interest rates increased - on top of repaying me?" I asked.

"No problem, squire."

I'm not reassured.

"Have you asked your family for help?"

"Are you kidding? You've met my dad. He's even worse with money than I am. Kidding!"

"What about Zopa?"

"What's that? Sounds like an alien planet. I'm not getting any financial help from aliens. Look, I reckon you're the man. I won't be offended if you say no. Well, only a little bit," he smiles, trying to make a joke of it.

"I'll think about it," I said, but I haven't yet found an answer. So what do you lot think? Should I lend him the money or not? Let me know using the comments box below....