Saturday, December 3, 2011

Money and Friends, part II

I mentioned my friend AB before, where I offered him a loan for some emergency car repairs. Side A was yelling at me "Don't do it!" and I asked why. They told me that it would damage our friendship. And if he can't pay, then things can get ugly. They told me to get a contract, witnesses, and even a notary! Or to simply gift, which I think is an awesome idea, but not quite the topic here. I'm looking at strictly loans, and they said no. 

But wait, I have faith in the world. I don't think Side A is the only way to go. Can lending money to friends be done right? Absolutely. But this goes against the grain. 

Side B: Lending money does not have to ruin the friendship. It can be managed.

Things you have to consider:
-Your friend: Do you really expect them to follow through on their word? 
-The amount of the loan: You should only loan what you can afford. Period. They're borrowing from money you can spare, not money you have.
-The reason: I am not asking for you to pry as to why they need a loan or why they don't have the money, but just have a general idea. Are they borrowing because of a need or a want? 
-Alternatives: Why you? Depending on the amount, why not a bank, a(nother) family member or a(nother) friend? 
-Payment schedule: Make sure you are both clear of what is expected, when and how. 
-Consequences: What happens if they don't pay? Will you call them and remind them like a collections agency? Will you let it go and not lend them money anymore? Will you require a collateral item in exchange of the loan? You don't have to be harsh. And just like the NO side, think in terms that they are never paying you back. Can you live with that without that amount without hurting your relationship with them? If not, then it may be better to say no to lending, or gifting or offering alternatives.

So how about you? Anything else I need to add to the list of things to consider for a smooth lending process?

I have loaned money to my family (outside of my payments for the car, car insurance, groceries and utilities, and 'family Murphy'), and I have never honestly expected them to pay back. I would like to say I am a different person now, but I would still not expect any payments from them. But that's for my family. I have not loaned money to friends, but I think I would expect payment back. I wouldn't be terribly disappointed if they didn't pay me back, and I would most likely forgive the debt without making a dent in the relationship. Next time they ask, though, I'd probably say no and that'd be that. I can't control whether they want to dent the relationship based on me saying no, and if they do, well, that's that. I definitely wouldn't say 'yes' just to keep a relationship. 

What about your experiences? 


  1. I wouldn't lend money to save my life. I have gifted what I can afford to give but I would never lend. That's what banks are for.
    Good luck.

  2. I agree with Mark(yes I actually said you Mark). I will gift it but never lend it. To many hard feelings come out of lending money.

  3. Have to say I agree with Mark and Judy. It changes the relationship. You can't control it, it just does. You are no longer friends but now you are lender and borrower. The friend that borrowed the money will always be thinking about it and so will you. Gift it if you can but nope don't lend.

  4. Just say NO. There are many ways a person can get a small loan - if they are going to friends it's because they can't get one elsewhere and I would consider that too much of a risk.
    I would consider a "gift" before I would consider a loan.

  5. I started to write a comment but it was too long, so I made it into its own blog post.

  6. I am of the belief that friends and money don't mix. I'm lucky that I have a big supportive family that could help us out either financially or help provide us with a place to live, so I wouldn't have to rely on friends. But if I ever let a friend borrow money and they didn't pay me back, I guess I just wouldn't look at them the say way anymore..

  7. I have experienced loaning to and from friends, but since it is only a small amount that I could pay in a few days, we didn’t ruin the relationship as many people assumed it would. I think it’s not a bad idea to ask for temporary financial help from friends who are capable and willing to lend you money, for as long as you would pay it back no matter how small the amount is. It is also better if you voluntarily pay it back even in he or she has already forgotten about it or doesn’t ask for it.

    Eustolia Nitta