I could just make him a $10K unsecured interest free loan to pay off the credit cards, but that would seem too much like a gift and would make us both uncomfortable.
I am thinking of offering to make him a $10K loan at 4%, secured by a second mortgage on his house.
4% is more than I make on any of my CDs. It is higher than a regular mortgage rate. It is generous for a second mortgage, but not absurdly generous.
A second mortgage would cost about $600 attorney fees, would be added to the loan, so would pay for itself in about 6 months. Also, if he dies any time soon, I would eventually get the money back. It is not all that important that I get the money back, but if he is dead I would rather pass the money on to my family than his.
What are your thoughts on this?
I am adding what follows to the original post, because I know people often read the first post and then respond without reading all the posts in between, and I think this is an important point:
Lots of people asked what kind of bad decisions he makes, and there seemed to be the assumption that he is a spend thrift. That is not the case.
He had a business as a construction contractor and usually under bid and made very little money for the good work he did. He paid too much for equipment he didn't really need, then sold it too cheap.
At one point he had $5K extra cash from a job that went well. He had regular income then, and $15K credit card debt. He would not need that $5K any time soon. I asked him what he was going to do with the extra $5K. He said he would put it in his checking account. I pointed out that the checking account paid zero interest and the credit cards were charging over 20% and it would make more sense to pay off the cards. This seemed like a big revelation to him. He thanked me profusely and acted like I was a financial genius.
Things that we take for granted as bogleheads are not really so obvious to lots of people.
Remember that half of all Americans are below average in intelligence.