Lending a Friend Money Can Ruin Relationships

Some would say, lending money should be left to the banks and other financial institutions. However, when a friend or family member is in need, it is oftentimes difficult to turn them away. As a friend, or a genuinely caring and generous person, you may be the type who have no problem helping people out with money in cases of emergency with a promise to pay it back in a reasonable period.

Lending money to friends can become a volatile situation. Once you cross the line and begin to lend money to your friends, you can ruin the relationship altogether, depending on the circumstances of course. There are many scenarios where it may not affect the relationship at all, specifically, if the money is paid back each time, in the exact amount, and the agreed upon date. However, the relationship may begin to suffer if these deal breakers begin to occur over time, more frequently, and with no respect or regard for the agreement to pay the money back.

A friendship is generally based on trust, honesty, support, and reliability. You want your friends to listen well, be there for you in times of stress, need, or simply as a companion. Friends who run into money issues occasionally are easier to lend to than those who seem to always have problems. There’s also other factors such as the type of money issues your friend encounters. Is it the same issue over time? Perhaps, they overspend, or shop too much and end up short and can’t pay their bills? Did they lose a job, go through a divorce, or became ill and lose work wages? You see, there are many legitimate financial issues that can occur at any given time, to literally anyone.

However, if you are constantly bailing your friends out and the money is not paid back in a timely fashion or even with a good explanation, then this is when the relationship may suffer. You may begin to feel used or disrespected. After a long time of waiting to be paid back, your communication with your friend may even suffer, now with the added tension of trying to avoid the “money” topic. The friend who borrowed the money may feel guilty and start avoiding you if they can’t pay you back as promised. They no longer return calls, texts, or emails. The trust in the relationship is now gone and until the money situation is resolved, or until that strain no longer exists, the contact with your friend, soon decreases.

Finally, before lending money to a friend and possibly ruining your relationship, consider two simple things; can you afford to simply just give them the money instead of loaning it? Think about it as charitable giving. If you will not need the money back anytime soon, no matter how much your friend promises to return it, why not just let them have it as say, a gift? The second thing to consider, is a contract the better way to handle the loan? This is ideal for large amounts and for those friends who need an agreement to keep them honest and on track. For example, a loan agreement is the best of action for a business venture or partnership that relies on future earnings or income in order to pay the loan back in full.

Always remember that lending money to a friend falls into a different category then say paying for lunch or for concert tickets. Basically, it can be a bad idea and destroy your relationship once you realize you made a financial mistake and that the loan itself, indicates that the person is now indebted to you and has made a promise to pay it back. When it doesn’t happen as planned, the next step or how you communicate will determine the path of your relationship.