Tuesday, February 27, 2007

Lending to Friends?

Here's a comment that was made on my post Friends Without Money:

I've helped out a few friends
financially when they were in
dire straits, I'm interested to
hear if readers advise against
that or not....or maybe give the old
advice of giving money to a friend
but never lending it for fear of
screwing up a friendship.

Do you lend or borrow money to/from friends? I have always had an extreme aversion to doing so-- it just seems like there is so much potential for ugliness. But I have lent small amounts once or twice. And I suppose I've paid for things for friends in a way that was like giving a gift rather than lending money-- again, this didn't involve huge amounts of money.
If Mortimer, the friend I wrote about, asked me for a loan, I'd give it to him. Oddly enough, I know he once lent money to a friend who didn't pay him back, and that was a couple thousand dollars-- yet another thing that helped lead to his current situation. I could also help Mortimer out by letting him stay with me for a while, which I already told him he could do if it became necessary. It's a trade-off-- I really value having my own space, but I don't love the idea of lending money. Neither is ideal, but Mortimer is a loyal friend whom I trust, and I wouldn't let him down.

What do you think of the issue posed by the comment? Would you lend money to a friend? Give money? Have you ever asked a friend to help you out financially?


optioned unarmed said...

I would lend money to a friend if they really need it and if they have a history of being financially responsible. I would not consider lending just to enable someone in their bad habits. But any money lent is money I would not count on having returned.

I only lent money once. A friend was between jobs and asked for $300 to help with rent. I gave him the $300 with no timeframe and no mention or expectation of charging interest. About two months later, he handed me a check for $350, and said to me, "You gave me some bread, and I'm giving it back to you with a little butter."

mapgirl said...

Having loaned money to friends and not received it back, I would say give it as a gift and don't make a loan.

I've written about this before and I feel very strongly. I have a loss of about $700 total, not really much, and that's spread between two people. One was a security deposit I never got back. The roommate who still owes me that has never paid me back and at first I spent some time being a little bitter about it till I realized that she thinks she's paid it back in full. Rather than take a risk that I might alienate her by mentioning it, I've let it slide. (I am chicken-sh*t, OK?) We're not big gift exchangers so I just think of it as a gift I gave her when she needed it. I am much happier having her in my life as a friend. We discuss money, but not in great detail, just enough for me to know that she doesn't need any help.

The other guy? I think he's a welsher and shady. I won't have anything to do with him ever again. Lesson learned.

There is only one person I've loaned money to in the past 2 years and she's paid me back because in her words, 'Owing you money literally makes me sick to my stomach.' She's paid me back right away two times for sums over $250. I usually only do it when she knows she's got money coming in and it's just a cash crunch for a few days.

Otherwise, I hand friends $20-50 as a gift and say 'good luck'. I expect my friends to TCB and they the same of me. Sure I'll help them if they need to move or some special chore around the house, like painting, but no more "loans".

Sandra from Novato said...

I've lent various amounts $400 something, $400, and $2,000 to *good* friends. In all cases, I've had to really pester them to be paid back. I am still owed $1,000 by the good friend I lent $2k to, a year and a half ago.

I'm done lending money to friends. In all cases, it seemed dire (truck brakes all but gone, repairs to pass smog test, rent when a friend was laid off)... it seems like a friend is the last person to get paid back.

I'm not lending anymore. Each time I lend to a friend, I cannot imagine them not paying me back when they have the funds. And I've been wrong every single time. Ooops...the guy I lent the truck brake money to, he still owes me half of $425 and we're not in touch anymore.

It's just not worth the bad feeling I have about them when they don't pay me back.

Tiredbuthappy said...

I've done it. Loaned $500 to an old boyfriend in one lump, and probably another $100-200 in little bits of things (dinners out where he 'forgot' he didn't have cash, etc). Of course, I dented his car, so things can get complicated.

I have also given money to friends. My partner and I gave a couple thousand to one friend over the course of a couple years. We were receiving a lot of cash gifts from our families, and this friend was trying to put herself through college. It was satisfying and she was very cool about it. I gave an older used car to another friend (single mom) one time, but that was bad. She let it sit for months before she registered it, and then it died within a year because she didn't take care of it. I had a hard time letting go of that one.

It's hard to imagine a circumstance where I'd loan money to a friend again, but I wouldn't say I'd NEVER do it. I'd probably try to see it as a gift, or I'd offer to do it through some third party like Prosper, or isn't there some other service that manages loans between individuals who know each other? I'd give to friends again in a heartbeat if I had money to spare and they needed a hand. I fully expect to do that throughout my life if I continue to enjoy the kind of prosperity I have right now.

Anonymous said...

I once loaned a friend 1K, and it was agony trying to get it back. I felt badly for asking her, she felt badly for not being able to pay it back when she said she would, and it dragged on. Since then, I tell people I don't loan money to friends, and there don't seem to be hard feelings. That said, I'd be hard pressed to say no to someone in need, and do so not expecting to be repaid. I've helped out friends with student loans and let them stay with me anywhere from one month to one year. The thing that bothers me is when people complain about not having money then seeing them take trips, buy clothes, etc. as if they don't see a connection between their financial situation and the choices they make.

mOOm said...

I loaned a friend several thousand so he could go to study in Germany before his funding kicked in. He paid me back. Then later I got into some complicated mess on other loans between me, him, and my now former girlfriend. The problem is there seems to be just as much of a problem if you say you won't lend money when you have a lot and they have little. That friend is about to inherit $70k which should solve all his debt issues and put a little towards some retirement account or something. From now I'll be able to say: "You got $70k - you aren't poor any more - or shouldn't be".

Clever Dude said...

A friend offered us $1000 towards our first home. We didn't NEED it, but having it helped show we had more savings.

We accepted, but on the condition of a contract. He was against doing a contract, but we insisted. We had a payoff date, no interest during the loan, but a penalty if we didn't pay it back by a certain date.

When it comes to money, it's business.

Jags Mollu said...

In 2001 I took a bank loan of 30K so that my friend could start a business. I did not have any stake in the business and the only deal was that my friend would pay the loan installments every month. 3 months later the business went bust and my friend's partner vanished with the money. After about 9 months I filed a case to recover my money as I was still paying the bank installments. The loan was for a period of 2 years.

In the end I withdrew the case. It was just not worth fighting for money and learnt a very expensive lesson. Now what ever the case is, I do not lend / loan money to anyone and since most of my current friends and family do know of this story, no one asks me for help any more.

Oh by the way, my friend is NO longer my friend. Never mix money with friendship.

Anonymous said...

I have never and will never "loan" money to friends. Back in the day, I have given money to friends and told them it was a loan. I knew from the onset that it was highly unlikely that I would see that money again. Sometimes I actually got paid back, and most times I didn't. I have never given over $500 and never would. I just don't think that it's right to ask your friends for large amounts of money. If you have been irresponsible, then you should pay the consequences. Most people have credit cards now a days so I dont really have friends anymore that need to ask me a for a few hundred bucks. Of course, if a friend was homeless I would still take them in and feed them. But I dont see why I would need to hand them over thousands of dollars even in such a dire situation.

Anonymous said...

I'm against lending out or asking for money from friends. That is a NO-NO. If you hit a brick wall, swallow your pride and ask FAMILY. I have never had a girlfriend ask me for money - they'll go without or wait for payday. For whatever reason, the men I've dated have asked for money. Once a guy needed it to save his apartment - like $200. I told him to not ask women for money and got offended. It was HELL to get it back and finally he sent his cousin to pay me back. What a coward! Secondly, my ex needed $400 to cover the Home Depot equipment rental for a job he was doing. I was VERY reluctant, but did it. He paid me back quickly because I had a screw face the entire time. We broke up later, but asking your sweetheart for dough is NOT cool fellas. Don't lend friends money! If you must, just give it away as a gift.

Jeremy said...

No loans. Just gifts.

Financeguide101 said...

Well it depends on what you are actually trying to do "helping" or "lending".

Anonymous said...

I've loaned money (in the $400 to $700) range to at least 3 friends. Two of them paid me back, one didn't.

I always tell myself that I may not see it, but at the same time, if your friends are people you love and trust, sometimes you just have to support that. Or at least I do. And sometimes there's a pleasant surprise that comes with it, i.e. it really helps them out of a tight spot and you've made a difference for someone. So I'd say context counts for a lot. We're all so focused on money, which is smart and necessary, but it's a tool as well as something to hold on to.

~Dawn said...

250$ is my psychological limit, and I don't expect it back when I give, I also don't give more than once to the person. If it happens again, they need help beyond what I am able to provide.

JRD said...

If money is loaned,especially to someone who is considered a friend; be very careful, you may actually be "giving instead of lending".
That particular loan may become very costly. Then again, it may be a payment to "weed out" bad friendships. Good Luck!

JRD (Bronx New York)

Jose Galarza said...

I lend $10K to a friend of mine to buy a house, he told that he will pay me back once the closing is completed, the transaction happened 03/2007, he was not able to make the mortgage payment and the house went on foreclosure 2 month later, I have not be able to recuperate the $10K, what can i do. Someone please advised.