Some people feel friendship and money don’t mix, and if you want to protect a relationship, don’t lend money to anyone. Of course, this is easier said than done. It’s hard to turn our backs on a close friend or relative who needs legitimate help, especially if they have no other alternatives.
Ultimately, it’s your decision. But before writing a check or pulling out cash, seriously consider whether this is the right move. Lending money can change your relationship with the other person, and you have to acknowledge possible consequences of this action.
Here’s a look at six reasons why you shouldn’t lend money to anyone.
- You Could Lose Your Money
This might be obvious, but it needs to be said. The person borrowing the money may promise to repay the cash within the next few days, weeks, or months. But the truth of the matter is there’s no way to know with certainty whether this person will actually return the money. If he’s having financial hardship today, who’s to say these challenges won’t continue into the near or distant future. A good rule of thumb: don’t lend money unless you’re prepared to lose it.
- You Don’t Like Confrontation
Take into account your personality when deciding whether to lend money to someone. If you’re the kind of person who likes to keep the peace and you don’t like confrontation, chances are you won’t approach the person or bring up the loan if they don’t repay as promised. This can lead to pent up frustration or anger, which might strain your relationship.
- They May Request More Money
If you give someone money, the person may come back for more. She may think you have a lot of disposable income, or that you’re in a position to help in times of need. And if she runs into problems again, you might be the first person that comes to mind. Some people are habitual borrowers, and one act of generosity can start a pattern. But if you turn down a money request the first time someone approaches, they won’t think of you as a money source and they’ll look elsewhere.
- They May Tell Others About Your Generosity
It’s awkward enough to deal with one person who repeatedly asks for money. The last thing you need is the borrower sharing details about your loan with others. Some people can’t keep anything to themselves. If you give them a loan, they might tell others how you helped with their situation. An innocent mention of your assistance might give others the idea that they can come to you if they experience a similar hardship. So, if you’re going to lend money, make sure the borrower understands that this is a confidential agreement, and you would prefer if he didn’t tell others about the arrangement.
- You May Need the Money
Never lend money that you’ll need in the immediate future. For example, if your friend needs $200, but the only cash available is for your rent or mortgage that’s due in the next couple of weeks, you’re better off telling the person you can’t help. There’s no guarantee this person will repay the money before you need it, which can complicate your finances. You might deal with late fees, or have to seek a loan for yourself.
- It Can Create Issues in the Relationship
If you have a solid relationship with someone, don’t ruin it with money. You’re trusting this individual to repay the money as promised, and if they never return your money, this may always be in the back of your mind and lead to trust issues. If you confront the person and ask for your money on more than one occasion, she may become defensive and upset with you. It’s a no-win.
If you decide to help someone financially, it might be better to simply “give” them the money, if you can afford to. If you don’t have any expectations regarding repayment, and if the other person doesn’t feel pressure to pay you back, the money won’t come in between the relationship.