4 Reasons to Never Loan Money to Family or Friends

If you’ve experienced loaning money to family or friends, you know the effects money can have on relationships.

According to a recent survey conducted by Bankrate, 6 out of 10 Americans have loaned money to a family member or a friend. And of those that have loaned money, more than 35% say that they experienced a loss of money, a damaged credit score, or it harmed the relationship.

Family celebration lunch and drinks

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In this article, I am sharing 4 reasons you should never loan money to family and friends, but I also want to talk about GIVING, as a viable solution to consider.

1. The Borrower is Slave to the Lender

“Just as the rich rule over the poor, so the borrower is slave to the lender.” This principle still reigns true and the last thing I want is a servant that owes me something. And I certainly don’t want the feeling of having a servant who is a part of my family or friends. No thanks!

Your loan to your family or friends can sometimes end up not being a priority in their eyes, which can amplify the whole lender and borrower relationship. For me, being in the position of a lender to a family member or a friend, can be flat-out uncomfortable. It’s awkward and can lead to problematic.

2. Money Changes the Relationship

In terms of your relationship, It could cost you more than you bargained for. When people owe you money, it can naturally make you question what they spend their money on. I’ve always found that it’s better to keep money out of the relationship, when it comes to family and friends.

Loaning money to family and friends can have a negative impact.

multiracial friends sitting on stairs near building in street
Photo by William Fortunato on Pexels.com

Whether we want to admit it or not, money has a way of changing relationships. And It’s really never worth it. I’m not saying you should never do business with family or friends. I’m saying steer clear of the servant to lender relationship by never loaning or borrowing money.

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    3. You Could Be Enabling Them

    When you lend money to family members or friends, you sort of give them an easy way out of their financial problems. There are usually numerous ways and multiple solutions to almost every money problem that a person finds themselves in.

    Helping someone is not only about loaning them money, but it means helping them see creative alternatives and options. A good idea is to take time out and sit down with them and help them figure out some alternatives to get through their financial situation. Often times, people need advice and fresh ideas MORE than they need your money!

    4. One More Loan is Likely Not the Answer

    Everybody needs help sometimes and that’s ok, but there is a good chance that a loan from you may represent another debtor that they don’t need.

    Without sounding insensitive, let me say that there is a reason they need a loan, and it may possibly because they have burned bridges with others, you are their last resort, or they made a series of poor decisions leading to the feeling that they need to borrow money from you. It may not be wise to add something else to their plate.


    The Solution

    Instead of loaning money to your family or friends, give them what you can afford to give them.

    crop black man with gift box
    Photo by Gabby K on Pexels.com

    Giving is Better Than a Loan to Family and Friends

    Give your family or friends what you can afford to give them, and let that be your gift to them, not a loan. Be sure to give and not expect anything in return. It’s always better to exercise the spirit of giving when a relationship that you care about is potentially at stake.

    It may be possible to simply give them the full amount they want to borrow. This is quite ok if you have it to give and you give it in the right spirit.

    Be a Giver

    There is also nothing wrong with stretching and giving them a little more, if you can. Promoting the spirit of giving, with a kind heart, can go a long way towards strengthening your relationship.

    So essentially, you can use this experience to show an incredible amount of love by extending the gift of giving to your loved one. If they are receiving with the right hear, they probably won’t refuse your gift, and they’ll be thankful you helped.

    It’s going to take courage on your part, but be strong, and give what you can afford to give. This may be money, creative advice, time, or other solutions. In the end, if you give what you can afford, with the right heart, you’ll minimize the risks of changing your relationship.

    The bottom line is this: You want to help your family and friends, but it’s not always best to help in the way they feel and think they need the help. However, giving is always a good solution, and it’s typically in the best interest of your relationship. They may not like it, but hopefully they’ll appreciate your willingness, and heart, to give.


    ABOUT THE AUTHOR

    Eric is the founder of Smart Money Bro, a blog about empowering people and discussing practical ways ordinary people can be extraordinary with their money. He only writes about things that he has done, and that actually work. He’s made mistakes and has turned his financial future around, and is now in the position to help others do what he’s done.

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