(Note – Thanks to Matthew for guest blogging while I am away visiting family. I will be back tomorrow!)
Have you ever been in an uncomfortable situation where a friend asked to
borrow money from you? What did you do? Did you loan them the money? Did you
politely decline? In any case, did it turn out well? In most cases, it
When I was in 5th grade, I was at the carnival with a couple of friends, and
one wanted to borrow a couple of dollars from me so that he could go play a
couple of games. Knowing this person, I figured he’d probably never pay me
back. I politely told him no. He retorted, “Come on! I’ll pay you back!” He
was very insistent, but I kept saying no. Eventually he decided that he
didn’t want to be my friend anymore if I wouldn’t loan him money. I sent him
packing. If your “˜friend’ thinks that you should loan them money otherwise
you are not their friend, you never had a relationship there to begin with.
It’s usually a bad idea to loan a money to a friend in the first place, but
if they threaten the relationship because you won’t loan them money, you
should start looking for new friends.
In other cases, you completely trust the friend and think that they’re good
people. You decide to loan them the money. Of course later you realize that
the only reason they needed to borrow money from you is because the bank
turned them down, and they really can’t afford to pay you back. The person
that owes you the money will then feel guilty and avoid you, because they
wronged you and they know that they did. Often times you will even start to
think negatively of your friend who couldn’t pay back the loan. Either way,
the relationship will be seriously strained if not diminished.
Of course there are a few times here and there where loaning money to our
friends works out just fine and no one really thinks anything of it. These
occasions are few and far between though. If it’s just a simple case of
someone forgetting their wallet and they don’t have money for lunch, just
write a check and buy them lunch. Chances are they’ll reciprocate it at
sometime or another.
If they are looking for a lot more money say to start a business, or help
pay for a new car, I wouldn’t recommend loaning them money. That’s what
banks and Propser.com are for. You’re not a bank, don’t pretend you are. If
you have a lot of money and want to help them, go ahead and give them the
money, but don’t loan it to them. If they really need a loan they can go to
the bank. It’ll just cause un-needed strain on the relationship that neither
of you need.
It’s just not a good idea to loan money to friends, period.