It is better to say ‘no’ to loaning a friend money and save your valuable relationship

How many friends have you lost as a result of your money dealings with them? Money is one of the most emotionally charged subjects of our era. It has always been, and always will until we learn how to handle that emotional roller coaster.

We’ve all been on either side of the spectrum. A friend asks you to help them with R50 but never seems to have the cash available to pay you back, or conveniently forget when they see you. A month later, the same friend will ask you to help with another R30 because there is a shortfall from her funds. By this time, friend has completely forgotten that he/she owes you the previous R50. How do you feel?

R50 or R30 might not be such a serious amount of money to let go, but what if your friend comes crying to you and desperately asking for R3000 or R5000 loan because of some emergency? You get asked to go take a loan in your name to help. Bear in mind you have learnt from the R30 that this person doesn’t pay back and deep inside, you know this money isn’t going to come back. Think about the tension that will exist in the friendship as a result of an outstanding loan. Some people stop talking to each other for many years and many others carry this heavy burden till death.

There are very few cases where friends had money transactions that went respectfully well and no change in relationship has been experienced. Why? Often, these friends respect each other and made it a habit to honor their promises – no excuses.

The majority of people involve money in their friendship, and they experience a sudden a shift in the balance of power. Money creates a sense of obligation within the friendship, and there’s a chance this loan may not be taken seriously enough as a conventional bank loan.
Perhaps before a loan is extended to a friend, the following questions must be asked. This will help the one loaning the money to determine whether this loan will be a walk in the park to collect or a limpet mine field ready to explode each time the money issue comes up. Ask yourself the following:

  • Is the money requested by my friend a lot for me?
  • What would I do with the money if I don’t lend it to friend?
  • Why is friend coming to me or somebody else and not go to a bank?
  • Can I draw up an agreement and charge interest at the normal interest rates?
  • How will I collect the loan payments?
  • What will I do if friend doesn’t pay me as per the agreement?
  • Is it worth possibly destroying my friendship by lending this money?

Maybe the borrower must also ask himself/herself the following questions before asking for money:

  • Why can’t I get a conventional loan from a bank?
  • In the event that something happens and I cannot pay the loan, what will happen to my relationships, and is it worth destroying the friendship for money?

My point is: If you have money and can loan your friend, keep it in mind that it may not come back and be fine with it. For others however, as inconvenient as this may sound, it is still ultimately easier to face the temporary discomfort of saying ‘no’ to an initial loan request than to have some tough conversations that follow after things get sticky if you proceed with the loan. At the debt free dream we teach you just the right language to say ‘no’.