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I get at least an email or two each week by a reader wanting to know if it’s ever ok to lend someone money.`
Simply put, the short answer would be no. But we’re human and therefore, there’s more that goes into the decision-making process than just a straight thumbs up or down.
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Is It Ever Ok To Lend Someone Money?
Several years ago a dear friend asked me for a loan. She was desperate. I mean desperate. She had a bill that needed to be paid, and she was significantly short of money. Her reputation was at stake, as she needed the money for a business transaction.
I lent her the money, all five thousand dollars of it. And when I did it, I knew she would do everything in her power to pay me back, but I also knew there was a chance I’d never see the money again.
It’s been three years, and to date, I’ve never seen a dime of repayment. Now, my friend is not in a position to pay me back, and it’s unlikely she will ever be.
**Update: This loan was paid back, in full in November 2015.
Did it change our relationship? Did it put a strain or wedge between us? No, in all honesty, it didn’t. Most days I don’t give the money a second thought.
Often when I see her, she talks about how she needs to pay me back the money and how she’s not sure how she’ll make that happen, but that she’s never forgotten she owes it to me.
Of course, if Dave Ramsey were here, he’d probably give me a really good scolding for lending her that money. But I had it to give, and I went into the loan with full awareness I may never get it back.
Another friend came to me and asked me for a loan. She also wanted to borrow five thousand dollars. Although I love this friend very much, I’m often concerned about her financial well-being. I declined to give her the money.
You’re probably wondering why?
These two women use money very differently. The first friend was very frugal, cutting corners, using coupons, even felt sorry about going for a hair cut and color because she knew she needed to pay me back.
My other friend uses money recklessly. She has a million excuses, most of them for why she deserves to spend money on something she does not need. She has enormous debt, and I was fully aware of an outstanding personal loan she received over ten years ago that’s she’s never repaid.
I love them equally, but I didn’t feel confident my second friend would even attempt to repay me, and so I declined the loan.
Is It Ever Ok To Lend Someone Money?
Despite how the stories have unfolded, I wouldn’t give money to someone again – and here’re three main reasons why:
1. They Make Their Problem Your Problem
In both cases, gut feelings aside as to who would be more likely to repay me, both friends were asking me to make their financial problems my financial burden. It’s true I didn’t need the money, and the loaning of the money to either or both of them wouldn’t have impacted my ability to pay my bills or keep a roof over my head.
But that’s not the point.
The point is because neither of them was handling their finances appropriately, they both found themselves in a situation where they needed to ask someone for money. By asking me for the money, they were making their problem my problem.
I don’t want the burden of anyone else’s problems. I’ve got enough of my own.
I learned this the hard way by loaning the money and realizing after the fact what I was doing.
2. You Become An Enabler
Because I didn’t let my friend stand on her own two feet, I became her enabler. I gave her an easy way out of her financial problem. What I should have done at that moment was help her work through her issue and not bail her out.
After the loan, my friend did ask me to help her get a better grip on her financial situation, and she was making great strides to better managing her money. We worked on budgeting her money, tracking her spending, she lowered most if not all her living and business costs and was living very frugally. By working with her in this manner, I was truly helping her.
3. The Relationship is Damaged
I was very lucky that lending my friend money didn’t damage our relationship. Money is just money, and I understood that if I never got it back, I could make more, so I never worried about it.
But, most people are not of that mindset and so the forces of ownership, resentment, mistrust, guilt, anger and the like take over and change the dynamic between the two parties.
In the end, two friends now have a wedge that has been driven between them by this “loan” and the relationship is never the same. And because most people are not comfortable talking about the fact that one person owes the other, the ill feelings fester and cause irreparable damage.
My friend and I had a solid relationship and were very comfortable communicating openly and honestly with one another. In the end, it made the difference because we never stopped talking about it. It never got pushed under the rug.
Only you can decide if you want to risk your relationship with someone you care about.
It’s a personal decision, but keep in mind these three crucial reasons why loaning is not a good idea before you write the check.