Dear Mrs. Riches:
I've been divorced just under a year from a man who was great with money and left me with the house and a little bit of a cushion, of which I've been very protective up until now. My credit rating is outstanding. My only debt is the mortgage on the house. However, my annual income is only $28,000.
I'm dating a man (former high school sweetheart) with whom I'm very much in love, but he has no money. He was the victim of a dot-com bust several years ago, and is also divorced; his ex got the house, he must pay child support, etc.
He wants to get back into IT consulting, which he was very successful at in the '90s. I just found out that, because of a couple of bad years, his credit rating is 469. I decided to loan him $30,000 to get his business up and running, using my home equity line of credit. He knows how freaked out I am about all this and is devoted to proving himself to me because he wants to marry me and "take care of me for the rest of our lives." Am I a fool? Help!
--Feeling Pretty Stupid
Dear Feeling Pretty Stupid:
I don't take any joy from kicking people when they are down and anyway, it sounds like you are kicking yourself enough for both of us. Should you have written me before you offered the loan, I would have urged you to remember that you're just coming off of a divorce yourself. It's an emotional time to be making big decisions, especially ones that risk your financial future.
Despite the wince factor, how foolish you were will really only be proven in hindsight. If your beloved uses the money wisely, pays it back somehow, and lands on his feet while sweeping you off of yours, then you will look supportive, caring, and brilliant. If he ends up having a history of chronic business failures, a litany of reasons why none of these were ever his fault, and is a big drain on your resources, then you'll feel like a fool with a small "f."
In the meantime, you've already lent the money. Keep in mind that I am not a lawyer and that your best bet may be to seek legal and tax advice from professionals in those fields. However, after doing a bit of research on your options, it seems like the best thing you can do now is to document that this was a loan. Lay out the terms of the loan as completely as possible in writing (when you expect it to be repaid, when payments will commence, how much they will be, if you are charging interest, etc.) and then ask him to sign the agreement. Explain that you care for him very much but that, since this is all you have, you need to ensure you can recoup it should the relationship sour. Both of you are divorced and know firsthand that love doesn't always last forever.
If he uses some kind of emotional manipulation to try and get out of signing, then that will speak volumes. Any protests about how two people who love each other surely don't need to involve the law, and you'll want to consider removing yourself from this entanglement before it costs more than $30,000. (You could also call his ex and get her take on why his credit is so bad; you are sure to get an earful.) Otherwise, if he really is a decent, hardworking guy who will land on his feet no matter what, he will understand that you are currently a single woman who needs to protect what you have.
I would suggest that you refrain from mingling your credit with his in any way (no joint credit cards, etc.) while the jury is out on his dependability. Before you consider marrying him, too, you might want to find out when his credit will be cleared and how you can go about protecting your good rating. It's not exactly the "throwing caution to the wind" kind of romance, but then again, that's the kind of blind faith that later turns romantics very bitter.
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Fool contributor Elizabeth Brokamp is a licensed professional counselor who regularly talks money with her honey, Robert Brokamp, editor of The Motley Fool's Rule Your Retirement newsletter. To get your money and relationship questions answered, send her an email .