Should we lend to a friend?

We all want our friends to be happy and, by virtue of them being friends, we would do almost anything to help them be happy. We’ve all chipped in to help when a friend needed a quick buck here and there, but what happens when a friend needs a significant amount we have access to? What happens when become a bank to them? Should we let that happen?

Money Crashers quotes Shakespeare to answer this question:

“Polonius [from Hamlet] answers that in his next line: ‘For loan oft loses both itself and friend.’ Polonius knew that a loan to a friend or family member often results in the loss of both the money and the relationship.”

The article highlights that one of the issues is a refusal to put in place boundaries and details about how the loan will work.

“Loans to family and friends tend to be open-ended. The parties don’t reach an agreement for a timeline for repayments, and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans.”

This is then compounded by figuring out how to ask for your money back, putting strain on an otherwise good friendship or relationship. It can create tension at events which should be merely social.

Of course a consistent and outright refusal to lend money can itself be detrimental to a relationship.

Lifehacker highlights: “You never know when you may be on the other end of the spectrum, and when a friend is in need, you want to reach out and help them the best way you can.” We don’t want to say no, when we have the means to help a friend – after all, part of friendship is helping one another.

There’s also nothing stopping us from asking our friend why they don’t consider options from neutral parties – after all, they’d be taken money away from you.

Have they tried for a business loan or maybe a personal loan? Finance plans vary and one can be found that can help cater to your needs. What exactly is the money for? For example, if it’s for a business equipment to upgrade the business itself? You can get asset finance for that. Consolidation loans can be used to sort out other loans.

While going to a friend might seem like an easy solution, it doesn’t mean there aren’t caveats or repercussions: it’s not without consequences.

We should be careful about lending – or borrowing – money, but that doesn’t mean we should never help friends. Only that we should be strict about parameters, like interest or payback timeline.