Lending money to a friend in need may feel like the right thing to do, but things can get messy quickly. These are the ten top reasons why should never lend money to friends according to SurveyCompare.
#1. You can’t afford it
Unless you have no debts or financial worries yourself, don’t lend money to others, because there is a good chance that you may never see that money again. Besides, a real friend wouldn’t want to cause you financial hardship.
#2. It can make you a target
As soon as you have lent money once you are sure to be asked to do so again. Your friend will likely come back asking for loans again in the future and if word gets out that you are loaning money you can expect others to come knocking too.
#3. It’s a poor financial move
Loans to friends rarely include interest, which means you are essentially losing money every day that loan remains unpaid. You also have virtually no legal protection for your money if your friend can’t or won’t pay you back.
#4. You may be enabling bad behaviour
While there are plenty of good reasons for your friend to want to borrow money, if it is to support an addiction your money will do more harm than good. If you care for your friend, help them to find the support they need rather than lend money that is enabling harmful behaviour.
#5. It can change the dynamic of the friendship
Even if all goes well with a loan it can seriously harm your relationship as you will no longer view one another as equals. This dynamic will become even more toxic if repayments aren’t made on time and can often lead to a friendship being lost.
#6. It’s too informal
Most people feel too awkward to make a formal loan agreement with friends; as a result, the loan recipient may not take the loan seriously. Confusion regarding how and when the loan is expected to be repaid can also lead to bad blood between you.
#7. It’s a short term solution
If your friend’s financial problems require large or regular loans, you may be just throwing your money into a bottomless pit. Look for longer term solutions, such as helping them to get a second job or working together to create a budget.
#8. Repayments can take forever
Even if your friend has all the best intentions you may not see that money again for quite some time. Their higher interest debts and core living expenses will always be a greater priority than repaying your loan.
#9. It could be a crime
If one of your friends is involved in questionable behaviour that you believe may be illegal, don’t lend them money! You can be charged with a crime if your money is used in breaking the law and pleading ignorance will be no excuse.
#10. It can get ugly
Lending money to a friend can reveal traits you’d rather not know about. Even though you are trying to help, your friend can feel embarrassed, resentful and judged, and if they fall behind on repayments, many will lie about their situation, get highly confrontational or ignore you altogether.
Lending money to friends rarely ends well, which is why you are best to avoid doing so. There are plenty of ways to help a friend in need, so keep your wallet in your pocket and find another way to help.
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