Would you Lend Money to Family or a Friend?
by G.E. Miller on June 29, 201023 Comments
We’ve all heard horror stories around lending money to a family member or friend, only to find out later on that they were not able to pay the lender back and it resulted in a damaged relationship. Despite the wealth of warnings, I am sure that it is something that we will all encounter at some point and the answer won’t be crystal clear.
Whether or not this has happened to you, let’s share and discuss:
- Have you lent money to family or a friend in the past? What was the result?
- If you haven’t lent money in the past, would you, if asked in the future?
- Are there any circumstances that you would or would not? What are they?
- How do you politely decline?
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I am G.E. Miller, & 
These situations can be very different. I lent my parents a sizable amount of money for a down payment (they moved because of a job, had to sell their old place at a rather unfavorable time); I didn’t set any specific conditions, but I didn’t have any complaints about how they paid it back. Worked out well for everyone, and hey, they did pay for all my shit for the first 16 years or so, so it was nice to be able to give back a bit.
Generally, things that benefit the family financial health as a whole, I wouldn’t hesitate about (it’s not a zero-sum game, that way). On the other hand, if it’s more of a “I need money to make ends meet this month” situation, it gets awkward pretty quickly. Obviously I would pony up the money at least the first time, but then a lot depends on how they handle their finances from then on.
Basically the deal is this: If you loan money to a family member, do not expect to get it back. It can cause more tension than it’s worth to do business with family. You should be prepared to accept that the “loan” is a gift.
It depends on the person and it depends on the circumstance. Some people are more reliable than others about paying back. And some situations are much more dire than others.
I have lent both my parents and my boyfriend money in the past. I have no problem lending my mother money because I know she will promptly pay me back. However, with anyone else, I have to be sure they will be able to pay me back. It’s usually not a good idea to lend out money to people in general. With the one boyfriend I lent money to, I made sure that, if he was unable to pay me back within a certain period of time, he would ask his parents for the money–so I’d be getting my money back somehow. Fortunately, he paid me back, but it’s not a risk I want to take again. I’ve also loaned small amounts to friends (like $20) and I generally don’t like doing that either, unless it is someone who is trustworthy and not flaky. However, those people rarely need to borrow money.
If I don’t want to lend someone money, I will either tell them I do not have it, or that it would be extremely difficult for me to get for them, or I explain that I am not a good person to receive money from because it may ruin our friendship–I will nag and complain and not treat them like a friend till my money is returned, so we are all better off if I am not the one to lend them money.
G.E,
Can I have five bucks? I swear man, I’ll pay you back.
It does not depend so much “on the circumstance” as on the _person_. Whether a family member or a friend, there are some – a tiny few – that I would lend my life savings, but there are many whom I would not lend money at all.
When lending money, there is always the risk that they would not repay, and until the loan is repaid, the relationship is compromised.
Here are some of the questions that I ask?
1) How much do I trust this person?
2) Why can’t they borrow the money from elsewhere” If the bank won’t lend them money, there is usually a reason.
3) If they don’t repay, am I willing to risk the relationship? The old joke “If you lend your brother-in-law twenty dollars and he never talks to you again, was it worth it?’ seems curiously apropos here.
I’ve lent a sizeable amount of money to my parents before. They were in a situation where their business was struggling post-9/11 and they didn’t have anywhere to turn (plus they recently had another set of children). I was in college but had worked a lot in high school and during summers and had the money to loan. It worked out ok because they paid me back while I was in law school and acted as sort of a saving device that allowed me to cut down on my loans in law school.
However, my sister recently asked me for money and I wouldn’t give her any. She has a history of bad credit, loan default, and lying. I would not put up with that from someone I’m loaning money to so I declined. She was in a real hardship but, based on her history, she’d been in these situations before and not learned anything because people had bailed her out. I simply felt that the best way for her to handle it was to do it on her own. That’s still playing out. I did offer to help her manage her debt and set up good habits, even offering to hold her own money so she wouldn’t be tempted to spend.
All this being said (sorry it’s so long), I think you have to evaluate each family member individually similar to the way a bank would evaluate a potential borrower. Some loans are a calculated risk while others are surely a bad risk. It sometimes helps to have an excuse why you can’t so that you don’t just tell them they aren’t credit-worthy. I told my sister that I had a large student loan payment I had to make and my extra money would be going toward that.
I have lent several boyfriends money, which did not go well – one angrily paid me back after we broke up (in cash, after a check he wrote me bounced) and another I wrote off completely.
I have lent my current boyfriend money in the past and also let him balance transfer to one of my credit cards (~6500) but since we live together and have set the date that is different. He paid the cash back promptly and makes the credit card payment each month – I am close to paying off my own credit card debt so it is actually good for my credit score to have another balance that gets more than the minimum monthly.
I also lent my best friend from grad school some money because she got a DUI while driving my car (she was the DD but apparently even 2 drinks puts you over the limit) and I felt bad. It took a long time to get paid back and I wouldn’t do that again – super frustrating to watch her buy expensive cameras and new laptops when she owed me $2500.
My dad gives me money sometimes but that’s not a loan. I’ve never lent family money and wouldn’t do it. My list has gradually narrowed down to my future husband ONLY.
I don’t think I would lend money, but I would give money. I’d rather give them the money, with no strings attached, than lend money and have them in debt to me well into the future.
It would really depend on what they need the money for, what their history with money is, etc. There are family members I wouldn’t loan/give money to unless it was an emergency (hospital/doctor) or something. If it’s not a large sum of money (relative to what I make) I would just give the money.
@ Peter – I agree. And that is probably a good attitude to have about it. But even then, there’s the awkwardness factor, if not from you, the guilt that comes from them if they haven’t paid back. It’s always ‘out there’ that they didn’t pay you back.
@ Jon – No. I’d never see that money again. $5 is 2 mug clubs I could have drank. But seriously, $5 is nothing… if you ‘lend’ out that much, you probably shouldn’t expect to ever see it again. Maybe I should have clarified a dollar amount as a low point.
Which brings up another good question – What is the highest $ amount you would freely lend to someone?
Interesting comments. I would also like to see a separate thread on how people handle panhandlers. In some ways family & friends can be more dangerous than P.H. because of the relationship factor.
Absolutely not. If I am giving friends or family money, I do not ever expect it back. It’s not worth it to me to have to deal with drama over payback.
I would not lend money to anyone – I’m not a bank. A year ago, when one of my very close friends asked me to loan him $200, I suggested that I instead give him the money because our relationship is worth more than the angst that $200 loan would provide to both of us. I also knew that he would not be continually asking me for more in the future and I was right.
I don’t trust loans with friends. It’s all but a a guaranteed default rate. With no coupon! Go figure.
I have a different approach. I’d rather give money to friends during times of need. That way it’s not needed to have that expectation of repayment, and thus jeopardize a friendship. It might even bring it closer, you know?
many people will lend money until they get burned once. then they will think twice the next time.
In school I lent $300 to a coworker since her paycheck was messed up twice in a row. At the time, $300 was about half of my bank account and her rent…she paid me back after the next paycheck when they finally paid her correctly. I had known her for a total of 2 days (the two times she came to the office I worked in to pick up her checks).
I would lend money more often but I’m a little judgemental. If a friend keeps “wasting” their money (in my opinion, no one has to drink bottled water or a 12 pack of diet soda every other day…), I feel less sympathetic than I did for the lady who wasn’t getting paid for her hours worked.
I have done it three times – once to my brother when he was “homeless” and needed a downpayment for rent – I got $300 of the $500 back. Once for my best friend for a flight to visit me – I got about $200 out of the $300 back. And finally I loaned my mother $7,000 for a new car after my brother crashed hers…she’s been paying me back on time (of course, I’m an AU on her CC and can pull it all out at once if she defaulted).
My rule is I’ll try it once if I can afford it but if I don’t get paid back in full, I’ll never do it again. I also charge interest and draw up a contract. I might not follow through with it, but at least there are guidelines in place and if I did want to take someone to court to get it back I could.
But in general, the rule is don’t lend if you can’t afford it. If you never see it back, make sure you can keep moving forward, otherwise you can’t afford it.
My biggest mistake was lending money to an ex friend. She wound me up so much that eventually police got involved. Anyway, she signed a written statement to say that she almost had the money and would be paying me back, she lied and has since bragged to people that after what i did to her, i wouldnt be seeing a penny of it, she planned it all, she is the sort of woman who knows which buttons to press then twists it around. The problem is that the police wont get involved, so she could have told them anything. The one and only thing i can say is that i have learned from my mistakes and i am so glad that i am no longer friends with her. In fact, I am surprised that she has any friends, as it was too late for me to see her true colours!
Bill Cosby said it best: “Never loan ANYONE money; either give the money as an outright gift, or don’t give it out at all!”
It’s not worth the drama that comes when someone flips the script on you to portray you as the villain when it comes time to repay the loan.
How can someone sleep knowing they owe their friend $500 ? I lent this son of a bitch $500 December 2009. He has travelled a total of 4 times after I lent him that money and still hasn’t payed me or mentioned anything. So before his last trip I told him since you obviously have money to travel you have to pay me back, so give me back my money his response ” yes I had I it in mind to pay you back ” forward 6 months after that comment and he still hasn’t payed me back! It is MAY 2011 almost 2 years since I lent him the money and he has no shame and talks to me as if nothing ever happened. I’m so mad I have decided to avoid him. Point black it is not my job to remind you to pay me the money you owe me!
I would not loan my mother money ever again after many times of not being paid back. Though she believes since some Dr cut me out of her once upon a time I owe her every cent I ever make. My boyfriend and I have loaned each other money numerous times and each time we have paid each other back eventually, though each time we got frustrated with how long it took.We’ve been together 9yrs but keep all our money separate. I needed to borrow $2500 from an aunt for a summer class I needed to take and she told me she didn’t believe in loaning money but happily gave me the money. Really I guess it depends on who you are. I would gladly give money to my loved ones if I could afford it. When it comes to friends/others I would loan them the money only if I felt reasonably sure they could repay it.
Absolutely not! Family doesn’t pay you back, period, from my experience. These are the reasons:
a) you become last priority…….and that means you will never get paid back
b) you might get some, or an initial partial payment……if that’s the case, you can kiss the rest of it goodbye because family will view that as “I paid you back”, even if its just a tiny bit, because in their mind they made a “good faith effort”.
c) you have to constantly remind people…….they will never write it down or even inquire. Once they get the money……see you later! You will have to harrass them for it.