Your Friend Asks to Borrow Money, Money Matters Between Friends, Part 3

Here's part 3 of our series on a Kiplinger's piece on money matters and friends. The issue for the day from Kiplinger's:

Problem: Your friend asks you for money.

Solution: Lending money complicates things by turning your friendship into a business relationship. If you feel comfortable doing it, and if you can afford it, go ahead. Just don't expect to get the money back, even if it's a large amount. However, if you prefer to set it up like a loan, go through a third-party administrator such as CircleLending.

Oh, yeah. This is a touchy one.

Here's how we handle it:

We decide whether or not we want to GIVE the person the money (we don't do loans). If it's for a good reason, it's not too much, and we feel right about it, then we simply give them the money and explain that we're happy to help. We've found that this alleviates a lot of the tension associated with one friend owing another friend some money. (BTW, don't send me an email asking for money -- we only consider it for VERY close friends.) ;-)

On the opposite hand, if we decide not to loan them the money, we usually decline and say it's just not in our budget at this time. Most people understand.

We did have one extreme case several years ago where a high school friend of mine (a good friend back then but we really hadn't been in regular contact for 10-15 years) emailed me and asked for a $60,000 loan! Yikes! he explained that his family was deep in debt and he wanted to consolidate into one loan (with me). I emailed back and offered advice on getting out of debt, giving him some links to follow, but saying we didn't have $60,000 to lend. I haven't heard from him since.

What are your thoughts on this issue? How do you handle it?

Click here to read part 4 of this series.

Click here to read part 1 of this series.

Comments

[GHoosdum]

You probably wouldn't have heard from him ever again even if you had lent him the money!

Good thoughts on loaning money between friends - I agree that it's more of a hassle than it's worth. It has been years since I've ever set an expectation that a friend pays me back, and it is a LOT less stressful.

[teverett96]

I have the same philosphy as you. Money provided to friends is treated as a gift from me. If the friend wants to pay me back, that would fine but is never required.

I make it a point to never broach the subject with them again about the money. It is a gift / karma thing.

If you can't help loved ones, who can you help?

[Kira]

Wow, that's a hell of a lot of money.. Did he have some inkling back then that you would be raking it in as an adult? Because that would be my guess as to who he called first, who he thought would have that much on hand, not who he was close enough to that he thought they might lend it. He must have been really desperate to ask for that much from someone he wasn't in close contact with.

[FMF]

Kira --

Tell me about it.

I'm not sure if he thought I was successful or not. I think he was just desperate and was asking whoever he knew (I don't think he had many friends after high school and his parents weren't wealthy.)

[Kira]

I would be extremely hesitant to give somebody that much money - because it seems that if they are on the downhill slope, they can never pay it back, and if they are already on the uphill slope then they can probably work something out with the corporate creditors. It's just not sportsmanlike to ask your friend to forgive a portion of a large loan, but corporations can do it all the time. For somebody with that much debt, they're probably sliding into bankruptcy, and fast. At my age I don't really have enough money to lend anybody, but just as you shouldn't put all your money in one stock, you shouldn't give all your money to one friend, even if they are the most trustworthy person on the planet.

When I read this post initially, I thought about the few times I received calls from people I hadn't heard from in years - old neighbors, parents of friends of friends, whatever - who needed a babysitter pronto. It always made me uneasy. I know they were in a tight spot, but why me in particular? I really doubted it was because they remembered my stellar child-control skills. How many other people said 'no' before they called me?