What I wish I knew before I lent money to a friend

Good friendship should never be about keeping score. The majority of my close friends and I have at some point or another commented things to each other like how we’ll get their next coffee or we will leave a little extra for tip this time because they did it last time. It’s not an exact measure of who pays what and when. It’s a comfortable, automatic gesture that comes from spending so much time together that a few dollars here and there doesn’t matter.

And of course with apps like Venmo, Square and the mainstay Paypal, it’s easier than ever to pay someone back if needed. But what if one of your friends, a really close one needed to borrow money? A significant amount? This can be a difficult situation to navigate with anyone, but there’s a lot to think about when it comes to someone in your life who you care about and would do anything to help. So here’s some of the lessons I learned but wish I had already known after dealing with it within my circle of friends.

Ask yourself: Can you afford it?

Amongst the people I know really well, if someone hadn’t had a chance to run to the ATM, spotting a twenty isn’t the biggest deal. But when a friend asks you for a financial loan that adds a couple more zeroes, stop and think because there’s a lot more to consider than nagging to get your twenty bucks back. First of all, are you personally in a position where you can be lending money? And if so, up to what amount? This is not a question you should instantly say yes to if you haven’t thought about whether you can comfortably pay all your own expenses and have enough left to help out a friend. And if you can afford it, are you ok with the possibility that you may not be paid back immediately? When someone has an issue requiring them to borrow money, odds are that issue won’t be rectified overnight. Even bigger question, would you be willing to lend it, knowing you may never get it back?

Have an honest discussion

As awkward as you might feel to ask these kinds of questions, if you’re serious about lending the money, you need to talk realistically about what comes next. Talk to them about how they’re planning on paying you back and what they have in mind to restore them to a better monetary situation. Are they looking for a new job? Additional side jobs besides the one they already have? Selling some personal items they don’t need, cutting back on daily expense to create more cash flow? Offer up some suggestions if you think it’s helpful to do so. If you’re participating, you should get a say in how they can help themselves as well as providing financial assistance. If they need help coming up with a better budget and you do well with your own, it’s a good idea to share your insight. Just communicate as much as possible. Assuming things are happening without confirming can lead to trouble and resentment. Honesty
is the only way this works.

Put together a payment schedule

Sometimes borrowing or paying back a large lump sum starts to seem overwhelming, so it could behoove both the borrower and the lender to come up with some kind of schedule, to pay back slowly over time. Small consistent payments can alleviate anxiety over accumulating debt with someone who is a friend and the person lending the money will obviously see that effort is being made so it’s pretty much a win win.

You don’t need to feel guilty about saying no

I have said yes to lending money to a friend and I have also said no. I said yes when I was in a position to help but I know now I should have done all the aforementioned things instead of blindly agreeing to helping her out. I assumed she’d be responsible and timely about paying me back without having much discussion about it, but when I saw her making extravagant shopping purchases, buying concert tickets and going out for expensive dinners before I had been paid back, it bred some resentment between us which I think could have been avoided if I had been more resolute about my terms when she borrowed the money.

When I said no to people who asked, it was because I was not financially stable enough freelancing to float someone a loan or I didn’t feel like it was a good idea based on past experience. One friend understood and respected my answer. Another went out of her way to keep reminding me what dire straits her life was in and I found myself wracked with guilt over it, and that’s not fair.

Life doesn’t always happen as we plan for it. Some of us come from more privileged situations or have managed to save an emergency cushion, but not everyone is so fortunate, and financial circumstances can vary considerably among a group of friends. But asking a friend for money can attribute so much undue stress to the relationship and changing you from peers to something almost like a boss and employee. And if you have a friend who has fallen on hard times and you want to help, there are other possibilities besides handing over a big check. You can help them with a job referral, or picking up some extra groceries or household items for them, or even just cooking them meals. If the circumstances are really bad, you and friends can set up a gofundme campaign to help prop up your pal.

No matter what the circumstances may be, the formula of friendship and money can be tricky. If you’re going to lend financial assistance to a good pal, just be sure the parameters are understood by both sides.

[Image via Comedy Central]

Filed Under