If or when a friend has ever asked to loan money, your first inclination is most probably to help him/her out. Still you have heard that as close as your friendship is, friends and money don’t go hand in hand. Some have learned this lesson the hard way and while there is a slim chance that your friendship may survive, you can save yourself the losses in advance.
Before we begin, let’s just say that not all loans between friends go wrong. But the chances of it going wrong are far greater than going right. If you need to think twice before lending a friend money, it is most likely that you are about to make a mistake.
The easiest way of getting out of an ordeal such as this is to just say no (in the kindest way possible). But beside the warning you’ve just received, you may just find yourself saying yes, and if you do agree to lend money, you need to be smart about it:
Discuss the options: How else would you be able to help your friend? Often money is considered the only solution when there may be other options.
Lend money that you can afford to lose: It’s more than likely that you are never going to see the money that you lend again. So don’t put your own financial well-being at stake. Take care of yourself first.
Lay your expectations down on the table: Draw up a budget and a payment schedule, and discuss what will happen if your friend is unable to pay the agreed amount for the month.
Put it in black and white: Don’t hand over money without any record of it. Put it in writing and create a form. You can find many forms that are like contracts online for free.
Deal with the problem when it rises: By not reminding the borrower that they over the payment date, you’re setting yourself up for disaster. As much as you’re being nice, you need to keep the lines of communication open.
“Neither a borrower nor a lender be, for oft loan loses both itself and friend”, Shakespeare wrote in Hamlet. So think carefully before you sign. Consider your friendship, and giving the money away instead. That way there are no hard feelings, and you can feel good about helping out, and remember it’s always okay to say no.