Loans and Lost Friendships: Should You Ever Loan Money to Friends?

Jasmine Wallis and Nathalie Gil* offer some tips for people considering lending money to friends.

Ask Google if you should lend your friend money and the consensus among financial writers and internet savvy is a definite no: it’s embarrassing, you probably won’t get it back, and it’s not worth destroying a friendship.

But the basis of friendship is mutual support – and sometimes that requires a financial bailout.

Since money problems are a defining trait of our generation, lending money to each other has become a mainstay of modern friendship.

That said, you have to be especially careful that it doesn’t drive a wedge between you.

Grace**, a 23-year-old paramedic, tells how her generosity caused her to lose $1,800 out of pocket.

“I lived with friends from college a while ago and when I moved they stayed together,” she says.

“They kind of convinced me to pay an extra month’s rent while they were looking for someone and said they would refund my deposit when they left because it was ‘too much trouble to settle’.

“I kind of took it in good faith that I could trust them.

“But when they finally moved, I had to spend about nine months chasing them for $1,800.

“It was horrible.”

Unfortunately, the situation meant that the relationship was strained to the point of no return.

Grace ended up losing her roommate friends, a bond that can often last a lifetime.

“If they had respected my time and given me a date to wait for the money, I might still be friends with them.

“After a few apologies, I started feeling like they wouldn’t give me the money back unless I harassed them,” Grace shares.

We’ve heard what happens when lending friends money goes sour, but is there a way to do it right?

If you are considering lending money to a friend, there are a few things to consider.

First, determine if you can afford the amount: is it $50 or thousands?

Lynn James, personal finance expert and founder of Mrs Mummypenny, asks, “Do you have cash on hand or an easy-to-access savings account? And is it money that you definitely won’t need in the foreseeable future? »

Next, consider the friend in question (be honest with yourself here).

Do you believe 100% that your friend will reimburse you? Not having clear guidelines (such as when to expect your refund or what the money is used for in the first place) can lead to strained friendships.

Financial Therapist and Facilitator Financial therapy Jane Monica-Jones podcast recommends asking yourself a few questions before handing over the money.

“If you are going to lend this money, are you going to give it unconditionally?

“Do they have the right to do with it what they want? And if you’re not happy with that, then… don’t lend the money,” she says.

Finally, ask your friend why he needs the money.

Are they dealing with debt issues, emotional spending, or shopping addiction? And do they have a family that could help before you intervene?

If your friend is dealing with an emergency like needing money for rent, a cash flow crisis, or a broken car, then that’s fine.

But what if they just want a nice new dress? Probably not.

Consider all the factors before putting your hand in your pocket.

According to Monica-Jones, the reason you may feel hurt if a friend won’t pay you back or you’re nervous about parting with your hard-earned money isn’t that you’re a selfish friend, but because in a capitalist system, money equals survival.

“Money is about survival and prosperity,” says Monica-Jones.

“So you ask yourself, ‘If I lend you this money, will I survive on my own? If I have to suffer this setback and if I don’t get this money back, will I survive? Will the friendship survive?

“We really talk about resilience.

This perceived threat to our safety and survival, such as lending a friend $20 when you only have $100 left for the week, can cause a range of emotions including stress, guilt and panic. .

“The financial situation has made the friendship much more strained,” says Grace.

“Every time we had coffee and I heard about the things they bought, like expensive lingerie, I wondered why they couldn’t refund the money.”

To avoid any awkward situations that could lead to the friendship breaking down, Monica-Jones recommends creating guidelines and an agreement before lending your friend money, especially if it’s a large amount.

“You should come up with some sort of repair and resolution strategy before you close the deal,” she says.

This includes all payment plans, when the lender should expect to be paid back, and how long the process will take.

When someone you care about is struggling financially, you want to do what you can to help.

But when the person is apparently well off but still does not pay its share or return the money lent to you, the friendship can quickly become a source of tension.

25-year-old marketing manager Samantha** felt it when a friend wouldn’t pay her back after a dinner or a drink.

“It would be a pre-conversation of ‘Yeah, I’ll send you money,’ which then resulted in me chasing them numerous times,” she shares.

“It got to the point where I was following up, they were telling me they would do it on the spot, then no.

“It was also frustrating because they are in a very different pay bracket for me (much, much higher), and that felt like super allowed behavior.

Stories like these are also a good reminder for the person on the other end of the line.

Do you take your friend’s generosity for granted?

While your boyfriend yells at you for dinner or a drink once in a while can be a nice gesture, making sure you do the same for him or offering to pay him back can help save your relationship.

Apps like Money By Afterpay can be an easy way to see where your money is going and remind you if you took the check to dinner.

According to Monica-Jones, setting boundaries (financial or otherwise) is like “building muscle.”

“It takes practice and sometimes pushing our limits works that ‘muscle’.”

She also notes that people tend to have no boundaries in interpersonal relationships when they are afraid of not being liked.

“But actually,” she says, “if we put a limit in place, we like ourselves After.”

Grace and Samantha tell Refinery29 Australia that since their unfortunate experiences, they have set better limits and become more careful when lending money to friends.

“I was pretty clear [to my friend] that I was frustrated with their behavior and was firm whenever it came to paying for things that I needed their money for first,” says Samantha.

“I also stopped offering to pay or say no when they asked to tour because I wasn’t convinced I would ever see the money.

They’ve started to be a little more aware of it, but I’m still treading carefully.

*Jasmine Wallis is a versatile journalist, podcast host, wordsmith, editor, producer and media slashie. Nathalie Gil is a freelance journalist specializing in women’s issues: politics, health and fitness, lifestyle, etc.

**Names have been changed.

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