Loaning Money: A Good or Bad Idea?

Sometimes the uneviable question gets asked by either a friend or relative. Can they borrow some money?

Loaning money to either friends or family can be a very tough decision to make. It might be a little easier to decide if you keep this one thought in mind. If you can't afford to lose it, don't lend it!

People don't always pay you back, even though it would be the fair and proper thing to do. If you don't think you could afford that kind of a "donation" to your family or friends, you might want to make up some kind of excuse, such as your assets are frozen at the moment or you just had to have your car engine overhauled, so your own funds have been depleted.

Often times, people too close to you, might take advantage and think the money doesn't have to be returned, or they've just forgotten entirely that they borrowed
it. Or, they might think that because you had this kind of spare cash to lend, you don't need for it to be returned. Even worse yet, they may hope that you forgot you lent it.

Depending on how much the loan is for, you might be reminded of how many hours of work it took you to earn that money yourself. How many hours you had to work at a job you might not particularly enjoy. If you look at it in those terms, would you want all those hours to have gone to waste, time you could have taken off work to do something enjoyable for yourself? Or you might even consider the things you yourself might have purchased with that money if you don't ever see it again. It might have been that big screen TV you'd been putting off buying, or that much needed weekend getaway you've been trying to save up for, or catching up on some of your own bills.

Some Questions You Should Ask Yourself First Before Lending Money

* How much do they want to borrow?
* What is the money for?
* How long would they take to repay?
* Would the friendship, or family relationship be jeopardized if it wasn't returned?
* Would you find yourself short on funds if this money was returned late or not at all?
* Can you even afford to make this loan...will your own bills get paid?
* How important is this friendship, or family relationship to you?

Will It Put A Strain On The Friendship/Relationship?

I'm not suggesting that all your family and friends are like this, but you might have to think very long and hard if lending money could put a strain on the friendship or family gatherings. If the money doesn't come back to you, you might feel as though you'd just been used. But if you've already prepared yourself for the possibility that you might never see it again, just consider it as a gift to a good friend! At least in that way, it won't jeopardize the friendship.

Another thing you might want to consider, if you never see the money again, will this end the friendship? If your answer to that question is "yes", maybe this is not such a good friend after all, and the money should probably stay right where it is, in your bank account. If the friendship could still stay in tact, even if the loan is not repaid, then consider yourself an excellent friend who is always there to help out someone in need. This person could possibly repay the loan in other ways, such as with favors. That way neither of you will feel as though you've used the friendship to its limit.

It might also depend very much on what they need the money for. You may not feel as though it's politically correct to ask, but then again, if it's your money that they're using, maybe you do have a right to know. That may make the difference between lending or not to lend.

Of course, often times, people don't put themselves in the vulnerable position of asking for a loan if it isn't out of dire need. However, the question may need to be asked, as it might be for something trivial, or something they really don't need at that very moment, putting a needless strain on your savings as well as the friendship.

When You Decide "To" Lend Money

However, if you do decided to lend and if it's a substantial amount of money, or money you really can't afford to just give away, you might consider attaching stipulations for repayment. You might insist that a certain amount must be repaid weekly or monthly, for example.

It might be a good idea to draw up a "loan" booklet, jotting down when each installment was paid and give them a copy. That way you both have a statement to keep track of when the debt will be paid in full. They'll always know how much they've returned, and how much balance is left owing.

This way too, it becomes more like a business transaction and the loan can be kept separate from the friendship. You might both feel a little more comfortable about doing it under those terms.

If this person is not in agreement with this method, then perhaps the answer to the question should be a resounding "no".

Rather than lament over lost money and/or a good relationship, think long and hard before lending it in the first place!