How to Borrow Money From a Friend Without Ruining the Relationship
Times are hard. If you find yourself in financial trouble, you might consider reaching out to a trusted family member or friend to borrow some money to help you get back on your feet. Or maybe your younger sibling is asking you for a loan to get them to their next paycheck. Be careful: you may remember Shakespeare saying, “Be neither a borrower nor a lender,” and I’m pretty sure he was talking about borrowing or lending money to those closest to you. Borrowing money puts you in the awkward position of feeling guilty if you can’t pay the other person back on time (or not at all). Loaning money to a friend or family member can also create feelings of resentment on both sides – you want your money back and they get annoyed that you’re after them for cash. In other words, by pulling in money, you risk quickly spoiling the relationship.
For these reasons, lending or borrowing money in friendships or family relationships is best viewed as a last resort. However, there are several ways to prevent things from going wrong.
Get it all in writing
Before you change money, Laura Adams, personal finance expert at Finder.com , advises thinking like a bank and putting everything down in writing: how much money changes hands, and the terms and conditions of its repayment.
“When entering into a major financial deal with a family member or friend, never be so careless as to miss creating an official promissory note,” she says. “When you want to borrow money from a friend or relative, put the details in writing first, offer to pay a reasonable interest rate, and make sure they agree with what you are asking. Proper documentation of the details is critical to prevent potential misunderstandings in the future.”
Treat a loan like any other bill
Christine Luke , also known as a financial worth coach, says it’s important for a borrower to treat a loan from a friend or family member like any other bill. “Pay on time and pay extra if possible to pay it off early. Communication is also key. If you can’t pay on time, don’t avoid this person. Be honest and see if you can change your agreement to get back on track.”
Adams suggests that if money is tight, create a budget for your income and expenses that ensures you have enough to pay off your financial obligations to family or friends. “You can include an initial grace period in your agreement, such as starting payments a few months after receiving the funds.”
Don’t lend money if it threatens your financial security
Sometimes we want to help our loved ones so badly that we may borrow money we don’t have, or an amount so large that we threaten our own financial well-being. It’s a big no-no. “If you can’t afford to lend money to your friend, then you can’t afford to lend it to him,” says Luke. “You risk not only relationships, but also your financial well-being. You also can’t afford the emotional and relational consequences of a loan going bad.”
Luca points out that lending money you don’t have “is not just stressful for the person giving the loan; it’s also an emotional burden for the person borrowing money” and will surely harm your relationship. “If you value your relationship with this person, you need to either explain to him lovingly that you cannot risk your financial health to help him or give him money,” she says.
Do not lend money to anyone with a history of financial irresponsibility or substance abuse.
While you certainly want to help your friend or family member, if the idea that they owe you money or may never pay it back hurts your relationship, it’s best not to go for it. This means that if they have been financially irresponsible in the past, and especially if they have a history of substance abuse that contributes to their financial instability, it is best not to get involved. “I know it can be difficult when someone tries to blame you. to give them money,” Luke says. “Unfortunately, some people resort to emotional manipulation to get their way. We must remember that someone else’s irresponsibility is not our problem. “No” is a complete sentence. You don’t have to explain to the other person.”
Just don’t do it
However, if you know you’re likely to succumb to someone’s bad story to get financial help, Luke recommends setting a personal policy of never lending money to (or borrowing from) friends or family members. “When someone asks, just say, “I have a rule never to lend money to friends or family. My relationship is too important to have money between us.”
Ultimately, it’s important to remember that whether you’re a borrower or a lender, your relationship can be strained until the loan is repaid. “If you have another alternative, like taking out a loan from your bank or credit union, that might be the way to go,” says Luke.