On Loaning Friends Money (or, I’d rather give)
True story: A couple years ago, someone I know asked someone else I know (let’s say persons A & B) for a favor. Desperate, tears running down his face, A asked B for $20,000+ to help finish his new home and to cover unexpected medical costs for his child.
B loaned him the money.
Weeks went by. Months. Then a big problem: Lender B’s home business was facing some problems, and he needed that $20K back.
He went to A; A didn’t have it and didn’t know when he would. Bigger problem. B wanted his money; A couldn’t believe B didn’t understand. Suddenly, what had been a good friendship became tense, awkward and stressful.
The good news is that this worked out, sort of. A ended up taking out a home equity line of credit to consolidate all of his many debts into one (same money, but one place owed). He paid back B just in time. The bad news is that their friendship was never the same.
I could tell you a lot of stories like this; you probably could, too. Somehow, when money gets involved, things can get ugly fast, even between good friends. I’ve always thought this, way in the back of my mind. I’ve always felt a little uneasy about the idea of loaning friends money.
When I was reading Total Money Makeover, Dave Ramsey pointed out the Biblical principle at work here: Proverbs 22:7 The rich rules over the poor, and the borrower is the slave of the lender.
Essentially, when you loan someone money, you change the dynamics of peer-to-peer friendship. Now you are one who loaned and one who owes. And that makes things complicated.
In fact, in Hamlet, Shakespeare writes something similar: “Neither a borrower nor a lender be. For loan oft loses both itself and friend…”
So here’s my personal philosophy: If my friend comes to me, needing money, and it’s a real need, I will give–no strings attached–what I can. They can think it’s a loan if they want to, but I’m giving it as a gift–no interest and no payment expected. If I’m unable to give them the money, I can offer to do anything else to help. But I won’t lend.
If I, say, go out to eat with my friend, and she asks me to lend her what she’s owes, I will. But I’ll just give it to her. I’ll tell her, don’t worry about it. If she pays me back, fine. If she doesn’t, it was a gift.
And, if at the end of my life, I’ve paid for more friends’ meals than I’ve been given, if I’ve given more money than I’ve received, if I’ve been the sucker as some would say, I’ll consider it a good life, indeed.
Filed under Biblical finance, gifting, money stories, relationships |
15 Responses to “On Loaning Friends Money (or, I’d rather give)”
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I could NOT agree more. I made it a rule too, to not lend money unless I never expected to see it again.
Friendships and familial relationships are ruined over money and it’s the reason why Money is the #1 cause of Divorce
I’m linking to this in my next round of link love
I’m also a big believer in not loaning money to friends and family. When I give I do it with no strings attached.
Just stumbled here from Stumble. Glad I found you! I’ve subscribed to receive new posts and look forward to catching up on your archives.
Thanks to both of you!
Frugal Dad, I’ve been a fan of your site for a while, so I’m thrilled to have you visit.
I definitely agree with you on this one, but I had to learn it the hard way. I let my friend borrow a lot less than the $20,000+ in the story you shared, but the outcome was the same. Our friendship is all but gone now.
Hi, I just wanted to say that I loved this post. I have always felt the same way, in that most friendships are not worth jeopardizing over money. Any money exchanged should be given freely and without expectation of anything in return.
I recently started my own blog, but have been reading yours for quite awhile. As an aspiring editor who is trying to get a hold of her finances, your blog is very inspiring to me and I just wanted to let you know that I love reading it! Take care!
BGS: Ugh, I empathize. While I was never in the position to loan money before, I did have a similar situation… long story maybe to be posted in the future. You’re right: it’s a hard lesson to learn.
Elle: Why, thank you! I’m very excited to go check out your site and will do so right now.
[...] On Loaning Friends Money (or, I’d rather give) posted at This Writer’s Wallet. [...]
[...] On Loaning Friends Money (or, I’d rather give) posted at This Writer’s Wallet. [...]
[...] On Loaning Friends Money (or I’d rather give) at This Writer’s Wallet [...]
[...] don’t mind giving to my friends; in fact, I believe in it. But maybe there’s some kind of line we can cross with giving. Maybe at some point, giving [...]
A friend of mine loaned money to a woman
she had only known a year for a down
payment on a car. She was always telling
her about all her bills and said she
was financially in debt. Recently, I
had an urge to search for this woman on
the Internet. She has moved and has a
very nice home, she was in a rental before.
How can she afford it if she is so in debt?
I told my friend she had been conned and
I think my friend finally learned her
lesson about loaning money.
I should add the woman promised to pay
her back and then kept putting it off.
She had the nerve to tell her that she
had never struggled to pay bills and
all she cared about was money when my
friend asked for some of the money back.
Needless to say, my friend got really
upset and told her off.
My friend had gotten some money when her
Mom passed, it was not alot by any means.
So in this case, it was lend, not given.
She didn’t have a contract written up,
she took her word for it which was a
mistake.
[...] someone. If you are considering lending money to a friend: Don’t put yourself in a tight spot. Only loan money you can afford to lend, and make sure you’re still allowing extra cash flow for yourself. List all necessary living [...]
[...] someone. If you are considering lending money to a friend: Don’t put yourself in a tight spot. Only loan money you can afford to lend, and make sure you’re still allowing extra cash flow for yourself. List all necessary living [...]