Should you lend money to close siblings, relatives? How a ₹10 lakh loan turned into a burden

My wife (29) and I (30) are both working professionals and generally manage our finances carefully. Last year, before we started planning for a family, she took a ₹10 lakh personal loan in her name to help her brother fund a construction-related project. The understanding was clear: he would use the money and take responsibility for the EMIs.

Initially, some payments were made, but over the past several months he has largely stopped contributing, leaving my wife to pay the EMIs from her own salary. Whenever she asks for repayment, he promises to transfer money soon, but little actually arrives. What makes the situation frustrating is that he doesn't appear to be facing a cash crisis. He recently spent heavily on his wedding, bought a car on EMI, and continues to make lifestyle purchases while ignoring this debt.

My wife is now five months pregnant, and we are becoming increasingly concerned about the impact this loan could have on our future finances, childcare costs, and savings goals. How should we approach recovering the money, setting boundaries, and protecting our financial future without creating a permanent rift within the family?

Advice by Dev Patel, Quantitative Research Analyst at 1 Finance

I can only imagine how draining this must feel with a baby on the way. You did a kind thing for the family, and watching it turn into a worry during such an important time is genuinely hard. We have two separate problems here, not one.

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The first is the bank loan. Since it sits in your wife's name, the bank holds her responsible, not her brother, and her credit score is the one at risk. The EMI must be paid in full and on time. Missing it to make a point to your brother only hurts your wife’s credit score and makes future loans harder and costlier.

The second is recovering the money. Your wife’s brother clearly has the means, and the frustration you have is valid. He spent freely on his wedding, a car, and shopping. He has simply put this debt last, since nothing happens when he skips it.

So gently stop asking and start structuring a repayment plan. Put the arrangement on paper with the amount and a fixed monthly repayment schedule, and ask him to sign it (a lawyer can draft this). Set exact dates instead and the amount. A direct talk would feel emotionally tough so a respected elder family member can help hold him accountable without it turning into a fight.

For your own peace of mind, plan as if this money may never come back. Treat the EMI as a fixed cost, keep your emergency fund ready, and let any repayment be a bonus you do not depend on. This keeps your baby plans and savings safe.

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And please do not fear the family rift too much. The strain is already there each month your wife quietly pays for his choices. A calm, clear, written arrangement protects the relationship far better than silent resentment ever will.

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