It can be an awkward situation for all parties involved when friends need to borrow money and can easily become a huge money mistake. It’s usually no big deal if someone needs five or ten dollars to cover lunch. But what if there is a large expense that they need help with? What if they ask you for hundreds, even thousands of dollars? If you don’t have the money, the answer is simple and you can say a heartfelt no with a clear conscience. But if you have the money to lend, it can be uncomfortable to say either yes or no. If you decide to say yes, play by a few ground rules to put you and your friend at ease.
Determine when and how the money will be paid back- Ask your friend how quickly you will be repaid, and remain flexible. Suggest that he or she give you a small payment over a long period of time if coming up with the lump sum will be a challenge.
Keep it between the two of you- There is no need to involve your entire circle of friends in this financial transaction. It is probably embarrassing for your friend to have to ask you for money, so your discretion will be appreciated. Also, you do not want everyone on your friend list to know that you are willing to lend money, otherwise others might feel encouraged to request a loan.
Decide which is more important – the friendship or the money-This is important, because there is always a possibility that you will not be paid back. If your friend is slow in repaying the money, or simply unable to, are you going to threaten to break his kneecaps? Will you garnish his wages or attach a lien to his home? Hopefully not. You ma
y never lend him money again, and that is understandable. But enter into the loan understanding that this is your friend first, and a recipient of your generosity second.