Tuesday, November 29, 2011

Research topic: Money & Friendship

I have decided to do some research on certain things and share my findings with you. These types of posts will be done in 3 parts: Side A, Side B and conclusion/compilation. Any feedback is greatly appreciated!

Money and Friends : Does lending money to a friend ruin the friendship?

I have a friend. Let's call him AB. He's the kind of best friend I'd entrust with my wallet, my social security card, my mother's maiden name and my first born child. You know those calamities we think of when we say someone's had a "bad year"? Most have happened to him in the last 18 months. He's not your exemplary money manager, but he's not wasting his money in an offending manner. He's just had a very tough time.

Then his car broke down and it'd take about $300 to fix. It had to be repaired ASAP. I offered to lend him the money until he got paid that next Friday. The only reason I offered a loan and not a gift is because he would never accept a monetary gift from me (I know, I've tried). He refused. I insisted, he still refused. He said money damages friendships. So, does it?

Side A: Of course lending money ruins friendships! 
Poking around the net started to shout at me, "don't lend money! It will be over! Bad idea! Your friendship will be damaged, crippled or gone forever, despite anything you can do!"

This article from Mr. Mafioso at Askmen.com says that nothing quite kills a friendship like lending (or refusing to lend) money. They argue that it just can't end well. Then we have this article by CompanionTree and recently by TheSimpleDollar where loaning money to a friend should only be done if you're willing to a) write it off as a gift or b) be prepared for a legal battle in case of default. The first two articles suggest: a written, signed contract so that both lender/borrower know what's going on. Or to just gift the money if you can afford it. Either way, loans and friendship don't mix.

TheSimpleDollar takes a less strict hands-off approach I sort of prefer to the contractual version, where you leave the lender take ownership of the loan. Their terms, their repayment plan, and if they fail to do so, they've already been told no further loaning would occur. If those two aren't enough of a read, head over to PersonalLoans.org for 41 stories why NOT to lend the money.

If the friend can't repay because of their own mismanagement or because of things outside of their control, both sides will suffer:
  • From the lending side, there will be resentment. You will lose trust in this friend. 
  • From the borrower side, this will add stress and embarrassment.
Have you ever considered loaning (or gifting) money, but didn't? What were your reasons? How did it go?


  1. I've never loaned money to a friend. I have bought stuff for other people when they needed it though.

  2. Never loaned money but I like buying things they want such as gifts. Never thought of loaning money though unless it was a family member.

  3. I can honestly say I've never lent money to a friend. HOWEVER, I did lend $$ to a "boyfriend" which I never saw again. Burned once, never again.

  4. I loaned my sister $1K towards tuition costs then ended up gifting it to her as I know it would have been a struggle for her to pay it back. I've also loaned my BFF money a few times... She's always paid it back & if ever she couldn't, I'd choose the friendship over the money.

  5. It really all depends on the friend. I've only done it once. And everything worked out fine because she really has her stuff together. Which I knew before I made the loan. I, like Jane, loaned money to an ex. $60. But I hold onto that $60 grudge like it was a million.
    I think if you can "loan" the money as not to offend, but don't expect it back, that's the best course of action. Same with lending things like movies and CDs. If you'll be mad if you don't get it back, don't lend it.

  6. I only give if I can gift it. Loans make for bad feelings all the way around.

  7. It depends on the situation. I will gift money to those who I know cannot pay it back. Why ruin a friendship over money?
    And If in my mind, it is a "gift", then I won't be bitter because it cannot be paid back.

  8. I have at one point and it wasn't the easiest thing to do. Saying no is hard but having to wait and hope you will get back your money back is even harder. What is worst is if you have to go and ask, at that point the damage is definitely done.

    I remember when I did it, my money was promised back to me the next week. I remember almost every day for the week I kept wondering if I will get back my money. The day came and I only got half but it settled me a bit. I eventually got back all of it without asking and the friendship came out on top but I would never advise lending money to friends. You need a lot of self control so the best thing is to do like the simple dollar article and just gift it. If they do pay you back just accept it and count your lucky stars. Never ever give money you will need.