The danger of loaning money to a friend.

“Neither a borrower nor a lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of Husbandry.”

  • William Shakespeare

Few things can destroy a friendship faster than loaning money (or property) to one another. This can be a lose-lose situation for both sides. My mom loaned some money to a family member (who shall remain nameless) a few years ago. When she told my sister and me about it, we were horrified. This family member is not known for fiscal responsibility. She quickly agreed, but shared she was loaning the money never expecting to be repaid. She indicated the amount was small enough not to be a hardship if it were lost and, if not repaid, would be the perfect excuse not to loan additional monies later. We were impressed by her logic! The money was being given with no expectation of repayment and the money was also seen as a guarantee of protection from further requests. She was comfortable no matter the outcome. (By the way, it was never paid back.)

Loaner’s Perspective:

“Money separates more friends than it unites.”

  • Unknown

Loaning money to a friend changes the dynamic. You no longer are just a friend, but are now a creditor as well. Never loan money you cannot afford to lose. Do not loan your rent money or money for your car payment or your child’s tuition. It can only be money you have extra – even if they promise they can repay you next week. TV court shows are filled with people who loaned money to loved ones and were now unable to pay their own bills because the money was never returned. Do not become a statistic. Especially do not fall for the “I’ll pay you back with my tax return” – it is one of the most common repayment plans that falls through.

If you are loaning money to a friend, consider it (in your own mind) a gift. This will help you to be more comfortable with the situation. If the friend pays you back, fabulous; if not, it was a gift. Try not to monitor their spending. This will be a challenge. It can be difficult not to count every dime they spend on dinners, nails, vacations, etc. while you are still waiting for repayment. If you cannot avoid this, do not consider loaning them money.

Borrower’s Perspective:

“Before borrowing money from a friend, decide which you need more.”

  • American Proverb

Borrowing money from a friend can be a friendship ender. The relationship is no longer based on two equal people who enjoy spending time together. The power dynamic has shifted and your friend now has power over you. She is now not just your friend, she is your creditor. If you have read the section above, you will see I have advised her to consider the loan a gift and not to expect to be repaid. I am telling you the opposite. Do not consider this a gift. Pay your friend back every penny. Pay her back and express your appreciation and gratitude whenever possible. Sacrifice wherever possible to be able to give her the money as quickly as possible so you can return to even footing in your relationship. Do your best to never have to borrow money from her again.

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