Let’s say a friend is down on her luck and needs a little cash.
What do you do?
If you read my last post, you’d know my philosophy of lending money to your friends’ friends: don’t do it. In fact, don’t lend money to people you don’t know. Seriously. If you want to do that, use one of those peer-to-peer lending systems like Prosper or Lending Club — those have rules and payment systems.
But friends are another story. You have friends that go way back, friends you can trust, and friends who treat you like family.
If a friend comes to you and asks for money, here’s what you should do:
1. Figure out what they’re asking. You know they’re in a rough spot if they’re coming to you. Pride can only carry a person so far before they ask for help.
2. Ask yourself if you can help. Can you afford to lend your friend the money they’re asking for?
3. Decide to give it to them (if you can), but let them know this is a one-time thing.
4. Set the terms. Give them a chance to pay you back in installments or when their paycheck is deposited, whatever. Don’t expect them to pay it back, but appreciate them when they do.
5. Don’t talk about it to your other friends. Make this between you, the lender, and your friend, the borrower. Don’t gossip about someone’s financial situation to your mutual friends. That cannot end well for you.
6. Figure out an alternative. Instead of giving money, can you help in another way? Maybe you can drop off some groceries or a home-cooked meal, depending on what they need.
7. Whatever you do, leave judgement behind. If you give someone money, even if you’re lending it, don’t watch to see where it goes. Let it go. It’s no longer yours.
I’m a fan of helping in another way. It’s much more of a gift to bring over some milk and eggs than it is a loan. It’s what friends do, right? They take care of each other. But bringing money into the situation makes things weird, and very often, changes the nature of the friendship for the worse.
The Time I Asked for Help
I miscalculated my finances about a year ago, and my rent check was about to bounce. I panicked and asked a friend to help me out. He transferred money into my account that same day, the check didn’t bounce, and I immediately sent him his money back via PayPal when my paycheck was deposited three days later. That’s the last time I asked for help, but because the loan terms ended well before the traditional billing cycle, it didn’t affect our friendship.
Should You Lend Money to Your Friends?
My verdict is no, at least not in the traditional way. And if you do, you have to treat it like a donation, not a loan. Think of it in the same way you would if you were to give money at church. Let it go. I hope that my friends would come to me if they were down on their luck, and their only options were asking me for some help and taking out a payday loan from a modern-day loan shark.
What would you do? Have you ever asked a friend for a loan? Have you ever given a friend a loan?
Photo by Kathleen O’Malley