Should you ever loan friends money?
There are three scenarios in life guaranteed to end, like this sentence’s phrasing, awkward.
1) Admitting that you own U.S. Treasury bonds.
2) Laughing on a first date and having a fart slip out.
3) Being asked to loan a friend money.
The first two can be avoided to some extent, but we always seem to have that leech of a friend, er, friend in need to consider helping out with cash.
Should you ever do it? Of course – realistically, how are you going to get away with saying no? A better question, perhaps: how should you do it?
Certainly, there are several philosophies on the relationship between friends and money. In fact, there’s an even an entire WikiHow page on the best ways to size up the situation, complete with worst-case phrases like, “If Jason” – their choice of name – “is just a kind of merry jerk, you may be best off to consider that money gone and just resume your friendship, resolving never to ‘loan’ Jason any money in the future.”
One of the more interesting strategies out there, though, is surely a polarizing prospect.
By the suggestion of Deborah Hutchison, co-author of Put It in Writing! Creating Agreements Between Family and Friends, two pals should actually consider drafting a written contract when cash changes hands.
This idea could either intrigue or mortify you, depending on your ease with lending out dough, yet the results are supposedly very real.
Hutchison tells MSN Money in the U.S. that any kind of written agreement, even if it’s just on a cocktail napkin, may be more likely to end in a repaid loan.
Still, boy … perhaps it’s my own fear of awkward tension, but I can’t ever imagine feeling comfortable asking a friend to sign a contract agreeing to repay any money I’ve loaned (or vice versa). In the best case, you’d hand out the cash and trust any real friend would make it a priority to respect your generosity.
Do you ever loan money to friends? If so, how do you go about getting repaid? If not, is it because you’ve never been asked or because you make it a firm rule not to?
By Jason Buckland, MSN Money
Posted by: Rymo | Aug 11, 2021 8:55:43 AM
Ha! To the author, Jason: never, ever change! Your articles are the reason I keep coming back to MSN Money every day. Clever, funny, and ridiculous, but spot on - all things the finance industry needs more of! (This is reading like a love letter, but I've read some naysayer comments I disagree with, so I thought I'd chime in.) As for today's topic, I'm in the "I don't lend money to friends" camp.
Posted by: Canuckguy | Aug 11, 2021 1:35:17 PM
I never lend money to friends and I am speaking of big ticket loans, not the $10 spot when a friend is caught short at a bar, let's say, and you get it back within a week. Also my friends know me enough and they do not ask for loans. And if I was asked by a friend or relative for anything over $20, I would decline. It's the best way to keep your friends.
When I made the one and only exception to lend to someone(spouse's daughter), I loaned $10,000 and got royally stiffed out of $7000. Silly trusting me. It taught me a lesson.
Posted by: John | Aug 12, 2021 7:56:41 PM
Never! I made the mistake 40 years ago to lend my closest friend some money. I never got paid back, even after asking for it repeatedly. Eventually he absolutely denied ever borrowing it. There are no possible circumstances where I would lend money to a friend. If asked, I would just say that I am broke.
Posted by: Mags | Aug 14, 2021 1:39:49 AM
I don't worry about small amounts (e.g. you picked something up at the store and friend forgot to pay you back). However, I would have no problem writing up a promissory note if lending a sum to anyone. Of course, my mom would not lend money to me without a promissory note, so I have been well trained about it. Even if you think you would never sue to enforce the contract, think about what would happen if friend died. You need that piece of paper to collect from the estate and to stand in the line of creditors. If you lend the money and friend truly can't pay it back, you can decide to forgive the debt. if you lend the money and find out that friend is stiffing you but paying for luxuries that you yourself cannot afford, you have the option to sue. I think if you choose to sue over a debt, it is not YOU ruining the relationship -- it was ruined already by the defaulter.
Posted by: Rose of Mexico | Aug 14, 2021 8:53:00 AM
It's not always a good idea to loan money to a friend. It depends a lot on the friend involved.
There are times when it's best to buy food if they are in that sort of problem. At least they'd be able to eat, instead of spending the money foolishly. As for small amounts, I wouldn't have a problem loaning that to a friend, but again..it depends on the friend. My friends that I would loan money to are good for it, & I would never have to worry about the loan being repaid. However, I do have one friend who has more money than she knows what to do with, & her repayment (especially a temporary small loan) would be to pick up the next dinner bill. I've made it known during these times, that having the actual cash back is much better for me. That $20. or whatever comes in very handy when I'm a day or two away from receiving my pension cheques.
Posted by: binder dundat | Aug 14, 2021 9:29:22 AM
"Should you ever loan friends money?"
no, unless you don't care about your friendship. If a friend is asking for money then they seem to have issues with money altogether and you wont be getting it back. Binder dundat, not thanks
Posted by: jim wheeler | Aug 14, 2021 10:57:02 AM
I believe you should lend money if you can afford it to a friend in need-usually if you say no you lose that friend-were they a real true friend to begin with, yes but now they feel you dont trust them enough to be repaid and your relationship can dissolve
Posted by: green | Aug 14, 2021 1:08:55 PM
sometimes you just need to trust them and depends on your relationship when times were tough i borrowed 8000 from a best buddy no papper work just my word in 3 months i paid it all back and gave him some extra for the favor i think a friend will repay just sometimes it takes longer thn expected. its when the other person gets demanding that it blows up have faith and it will often work out
Posted by: wise philip | Aug 14, 2021 3:11:59 PM
There is no surer way to end a friendship than to throw lending money or items into the mix. Until the time comes that it is (possibly) repaid it will always be in the back of both of your minds when around each other. If it is paid back that is fine but I have found that then it usually leads to repeat requests for loans that become increasingly awkward to handle. If it's not paid back then the lender has to face the question of if they are willing to write it off for the sake of the friendship which once again leads to it always being in the back of your mind when around the person. Things aren't the same in the friendship, ever.
The same goes for lending items of value, cars/boats/RV's,etc. when something goes wrong when lending these you usually get the ' I didn't mean to break it,there must have been something wrong with it already' speal from the loaner and you are stuck with the tab of repair costs and a bitter taste in your mouth.
It is better if possible to make a gift of money if possible with no expectation of return. Obviously this will only work for amounts of money that will be unique to each individual.
Posted by: Q | Aug 15, 2021 6:22:50 AM
Never....unless you want to end the friendship. On rare occasions and if they are either family (usually even worse) or a very close friend...and its for an emergency not caused by them merely being irresponsible, then maybe (if it doesn't put you in a bad financial position), but with proper and enforceable paperwork (agreements).
Posted by: No | Aug 15, 2021 9:45:18 AM
I will never lend money to anyone now. I was engaged to be married and had joint account and shared a vehicle loan, lived together for 3 years. He made lots of money, but don't know why he had to keep borrowing from me. One day he just up and moved out while i was at work. Gone was my life savings.
Posted by: borrow legally | Aug 15, 2021 11:48:20 AM
I agree with "Q"--never. However, I don't understand the comment saying that the person lending could get demanding and THAT would blow up in their face. If you lent the money, you want it back in good time and have every right to be "demanding."
Frankly, write up an agreement (contract) and get that person to sign. Have it in how much was borrowed and when it all will be paid back. Then, when they don't pay back, after they have signed, take them to court. You win.
Posted by: BALJIT KAINTH | Aug 18, 2021 10:47:53 AM
I had lent $5000 to a friend and said she will pay in a year and after the year she said let me know when you need the money and I will pay you. But i didn't have the guts to say if you have the money you should pay me. After about another 6 months I finally had to say to her that I need the money to put in my RRSP, so she paid the money back.
Then again I lent $2000 to a co-worker and she had promised to repay after a year. But 15 month gone by and she didn't even mention a word. When I said to her that it has been over a year and that I need the money, she said "I will pay you when I have the money". Again months went by she said nothing. So I asked her again and she became offensive and said "what you think I am not going to pay you back", so I said " I need the money and you can pay me $100-150 every month". So I made up a sheet and wrote on it that you owe me $2000 and you will pay every month till it's paid in full. So every month I would take the paper to her and asked her for the payment of what ever she could pay. Finally after over two years my money was paid in full without any interest. After those instances, I decided not ever to lend the money to anyone again.
Posted by: Mani | Aug 21, 2021 2:46:18 AM
Lending a money to a friend? Yes I have. Firstly, you must know your friend well enough to lend money out to them. It also depends on their situation. Its hard to ask anyone for money let alone a friend. I know this friend so well that I knew when they asked....they must have had good reason for it. I trust this person very well to know I will be paid back and then some. I say YES...but make sure you trust them!!!
Posted by: Cindy the whore | Aug 21, 2021 8:34:04 AM
NEVER lend friends money. I lent 500 dollars to a bitch who is nothing but a braggart, and never got it back.
Posted by: Mark | Aug 21, 2021 8:46:56 AM
I have done this with good and bad results I lent a family member $3000 and never saw it back. Its frustrating and vowed to never do it again. I will never give this family member a dime again, but i have forgiven them and consider it a lesson learned.
However since then I realized that sometimes a friend may need legit help. My best friend needed to borrow $100 because he was short until payday, I thought about his kids going without food or something (my thoughts he didn't say that) so i GAVE him the money didn't say it was a loan on anything and he paid me back about a week later.
Now adays i have decided that if a friends asks for a loan and i decide to give them money its a gift not a loan and they can pay me back if they want. That being said the most I would probably give would be $500, and that I would tell them this is a one time thing.
I am no ones money tree anymore.
Posted by: Cinder | Aug 21, 2021 12:02:57 PM
Friendship is rooted in trust and respect, not manipulation and abuse. I would never lend money to a friend but I would give money to a friend (that is a person whom I trust and respect and who trusts and respects me). A true friend would give the money back promptly and with thanks. We spend our lives figuring out who our true friends are and hopefully learning to be true friends. True friends set boundaries and do not enable bad behavior.
Posted by: Realist | Aug 21, 2021 2:15:53 PM
I never really 'lend' friends money. I 'give' them money if I have it to spare with 2 understandings. 1. They will give it back when they can. 2. They do not ask for more until they give back what they asked for to begin with. This has always worked for me and I never give money that I couldn't be without. A couple of times in my life I have had "friends" that have taken money, asked for more, and when I said no stopped talking to me. I feel that the initial investment was worth it. I found out who was and wasnt my friend and I think the most I was "out" was $50.
Posted by: Cindy the whore | Aug 22, 2021 7:49:47 AM
I lent an ex friend 500 dollars and never got it back. Worse this braggart claims to be rich.