In the Media – How to lend money to friends (and family) (Forbes.com)
Forbes (screenshot)
On Forbes.com, journalist Nancy Rones offers advice on how to lend money to friends or family.
June 3, 2016
Whether the request comes from a friend or family member, it feels awkward when someone asks to borrow money. The rules of when and how to do it aren’t always clear. Writing for LearnVest and Forbes, Rones checked in with some financial experts for their advice.
She writes:
Getting hit up for a loan can make you feel like you’re stepping into a minefield.
In today’s economy, it’s easy to understand how someone can find themselves in a dark place financially. On the one hand, you want to help out a loved one who’s in need.
On the other hand, you’ve heard the stories about loans gone wrong, with friendships ruined and families torn apart. Also, you may be depleting funds that you might need yourself, says Irene S. Levine, Ph.D., psychologist, author and producer of TheFriendshipBlog.com. Even if you’re sure that the asker will pay you back, it’s hard to know if you should proceed.
In the article, Rone shares five key factors to consider to help guide you toward “doing the right thing.”
You can read the article in its entirety on Forbes. You can also read the article on Lifehacker and LearnVest.
Category: IN THE MEDIA, OTHER ADVICE
I had a friend ask to borrow a large sum of money I told her no. I never heard from her again. When someone asks for money the friendship is over. If you lend them money you may never hear from them again and they will avoid you. In this case they are the bad guy. If you don’t lend them money and tell them no you will never hear from them again either.This way you end up being the bad guy for saying no. It is a lose-lose situation. Friends don’t ask friends to borrow money. People just love to make their problems other peoples problems. If they can’t manage their own money properly why would I lend them my money??
There is an old and very wise saying: NEVER EVER LEND MONEY TO FRIENDS OR FAMILY THAT YOU CANNOT AFFORD TO GIVE AWAY! In other words, only lend them as much as you can afford to GIVE AWAY and be prepared for the worst case scenario, ie you may never get the money back! I have lent money (interest free) to very old friends of mine but I got him to sign a Promissory Note which read as follows:
“I/We, (insert name(s) here), declare that I have borrowed (insert amount herein words and figures) from (insert your name here). These funds are being loaned to me at zero interest and I declare that I promise to repay the loan in full on or before (insert date here)”
That note is good enough to take to Court to attain the funds if required but, seriously, I don’t think I would have ever followed that course of action. Instead, my husband and I decided that if he couldn’t afford to repay the loan on the designated date, we would probably just right it off but would NEVER lend him money again. As it turned out, he paid the money back in full, right on time.
My advice is to NOT lend money to family and friends if you can avoid it as some people may take advantage of your relationship to be tardy in payments etc. Lending money is one of the quickest ways to end a relationship (friend or family) if they default on the loan. I have heard some real horror stories and, believe me, it just isn’t worth the hassle! Interest rates are so cheap at the moment, provided one has not got a bad credit rating, loans can be attained quickly and cheaply. If the person DOES have a bad credit rating or is a declared bankrupt, do NOT take the risk.
Agree!!!!!!!
Great article. In lending or borrowing money, make sure both people have healthy communication skills so that if an issue with repayment arises, it can be discussed without impacting the friendship.
Also, don’t be afraid to say no. You don’t need reasons or excuses. “This isn’t a great time for me; I can’t do it.” If the friend doesn’t understand or gets angry, think of it as dodging a metaphoric bullet.