Why You Should Never Lend Money To Friends

You’ve known your friend for years. You know them well enough to trust them with anything, but does that mean you should lend them money? And what is the potential fallout for doing so?

These are questions that many people have asked themselves at one time or another. In this blog post, we’ll explore 8 reasons why you shouldn’t lend money to your friends, and what to do if they ask.

1) They might not pay you back

This is the most obvious downside to lending money to friends, and a very real possibility. Anything can happen along the way that prevents them from paying you back, which is something you’d have to be prepared for.

Also, some friends are more likely than others to return the money. If you don’t have faith in someone’s intentions, you might want to consider whether it’s wise to lend them anything.

2) They might think it’s a gift

There’s always the possibility that your friend thinks you’re actually gifting them the money instead of lending it to them, and thus might not think they need to repay it.

3) They might not prioritize repayment

If your friend is struggling to afford basic things like food and shelter, it’s unlikely that paying you back will be at the top of their list of priorities.

Your personal relationship usually removes the sense of urgency to repay, and many people become complacent, believing that they can take advantage of the situation due to the friendship.

4) They’ll avoid you

The pressure to repay you might be so overwhelming that your friend tries to avoid you whenever they can, for fear that you’ll keep hounding them for the money.

This is especially prevalent when they’re late with their repayment. They’ll feel forced to dodge your calls, stop showing up at events and gatherings you attend, etc.

You might not even have mentioned anything about the money they owe, but their guilt will get the better of them.

5) Having to remind them to pay you back is awkward

When someone owes you money, the last thing you want to have to do is keep reminding them to repay it. It makes for an uncomfortable feeling, and one that can negatively affect your friendship – not just with them, but with other friendships in your circle.

You don’t want to come off as greedy or stingy, but at the same time you want your money back. It can be difficult to strike a balance.

6) Keeping track is hard

Depending on how many friends you lend to, and the amount of money involved, it might be difficult for you to remember how much is owed, or to keep track of how much they paid back. You could end up losing money if, say, one friend insists they repaid you when they didn’t.

7) You’ll be judgmental when you see them making frivolous purchases

It’s an unavoidable aspect of money-lending that, once someone has your money, you become extra sensitive about how they spend it. You’re no different from a bank, in this respect.

So if one of your friends comes to you in dire straits, begging for $100 to pay a bill, and after you’ve given them the money you see them sporting an expensive, new pair of sneakers, you’re gonna feel duped and a little frustrated.

8) Your friendship could be ruined

This is probably the hardest part of lending money to friends, and a common reason why people don’t do it.

If you have a good, close relationship and your friend takes the money that you lend them without making any effort to repay it (perhaps because they’ve fallen on hard times), there’s every chance your friendship could be irreparably damaged.

Sometimes it’s not even about the money, it’s about the principle of the thing – the unwillingness to treat the lender with enough respect to pay what they owe.

What should you do if a friend wants to borrow money from you?

There are a few things you could do in order to avoid many of the aforementioned issues.

1. Don’t ever disclose how much disposable income you have – if they don’t know how well you’re doing, they won’t ask you

2. Draw up a contract – if you’re going to lend them money, put it in writing. A legally binding contract will protect you, and should be used when lending large amounts of cash

3. Gift the money – if the amount is small enough and you won’t miss it, consider gifting it to them. This way you don’t expect it back, and they don’t feel pressured to repay it

4. Help them make the money themselves – most people find it excruciating having to ask for money; they’d prefer to make it themselves. If there’s a way that you can find them a part-time job, or you have an easy, one-off job that you can pay them to do, this would benefit both of you.