It has been said that nothing can end friendships and split families quicker than money. This is even more true in the case of making a loan to friends or family members. Complicating things is the fact that we often feel obligated to help friends and family and this can turn to anger and hurt when the person you loaned the money too refuses to pay it back. Before you lend money you should carefully consider a few things that I have learned in the course of my life. While normally I try to avoid using personal experience when discussing financial themes,the nature of this question lends itself to using my own experience.
The most important thing to I keep in mind when lending money is to only give out what I feel I can afford to lose. In the past I didn’t do this, and sadly this put me in a bad financial position. What was even worse is that I lost a friend when I got angry at them for not paying me back. By approaching money lending this way I not only protect myself, but I protect my friendship as well. If for some reason the person I lent money too doesn’t pay me back, I have an easier time letting it go.
Another rule I follow is not lending money to someone who hasn’t paid me back. There is an old saying that goes “Fool me once, shame on you. Fool me twice, shame on me.” This is a great example of being willing to say no. If you have someone in your life that has borrowed money before and never paid you back, chances are if you lend them money again, they still won’t pay it back. It sucks to say know to someone in need, but sometimes it is the better option. In the end, if a friend refuses to be your friend because you told them no, they probably were not your friend to begin with.
When either I don’t have extra money, or I feel the person asking will not use the money for what they say it’s for, I try to offer another option. This is a good way to avoid lending money while still helping someone out. This is a really good rule to follow if you suspect someone may use the money for something other than what they said they needed it for. If your friend wants to borrow money to feed their family, offer them some of your food, or point them toward the local food bank. Doing something along these lines shows a friend that you care without putting a potential strain on your relationship.
In the end you can avoid a lot of problems that are associated with lending friends and family money. By only lending what you feel you can afford to loose you don’t put yourself in a bad situation. By not lending money to people who have shown themselves as untrustworthy, you avoid getting hurt by someone you care about over and over again. Finally, by making sure they understand you expect repayment and having something they signed you create a more business like atmosphere and are more likely to be taken seriously.