It’s always nice when you’re able to lend money to a friend. Unfortunately, letting your friend borrow money can lead to problems that strain your friendship. Some people avoid lending money to friends altogether just to stay away from conflict in case their friend can’t pay them back.
But you don’t have to suffer the consequences and ruin a friendship the next time you help someone in need. With these 5 tips, you can make sure that lending money to a friend doesn’t turn into an awkward situation or potentially cost you a friend.
1. Make an Agreement Beforehand
First and foremost, it’s important that both parties understand how and when the loan is going to be repaid. Talk with your friend, make sure that they have a plan to repay you, and agree on a date. Draw up a contract.
A contract also makes sure that both parties are clear on how and when the debt will be repaid. Make sure everybody has the same understanding and if your friend is repaying you in multiple installments, keep track of each one on paper.
2. Maybe Just Gift It
If you’re not lending that much money to begin with, it might be easier on you and your cash-strapped pal to just consider it a gift and move on.
Your friend is definitely going to appreciate the gesture, and what goes around comes around. So long as the amount isn’t going to put you in the red, this is a great way to eliminate potential friction.
3. Be Friendly with Your Reminders
When you’ve lent somebody money, it’s important to remind them that they need to pay you back. Of course, if they’re in the process of doing so, according to a schedule that you’ve both set up, you don’t have to nag them too often.
But in the event that you haven’t heard from your friend since you cut them a large check? It’s OK to give a friendly reminder. Just remember to be polite and tactful.
4. Use a Third Party
If you’re letting your friend borrow a significant amount of cash, you may want to consider calling in an agency or another third party to essentially mediate the process for you. They can draw up the agreement and formalize it, which will help you avoid like feeling like a loan shark every time you call your friend.
5. Don’t Always Count on Getting Repaid
The simple fact of the matter is that sometimes people don’t pay their back their debts. That doesn’t make it right, but it can still happen — even between friends.
If this happens to you and you can afford the financial loss, consider whether the friendship is more valuable to you than the actual money. If so, consider it a lesson learned.
But remember, if the amount you’ve loaned to your friend has strained your finances, you can also explore your legal options such as small claims court.
Got Any Tips for Us?
And of course, if you have a bad experience, don’t lend that person money again! Do you have any tips for lending money?
Let us know in the comments so we can dodge the debt drama.