What is your Money Lending Rule?

This is an interesting question that applies to just about everyone.  What do you do when a friend or family member asks to borrow some money from you?  What is your rule?  Or do you have one?

Personally, I try to avoid lending money to friends and especially relatives.  However, I give the exception to the rule to immediate family.  Why do I avoid lending money?  No, i'm not greedy over my money, the fact of the matter is if you lend out money to your friends/family, you'll most likely never see it back.  After a long period of non-payments, it may be awkward to keep hounding for payment.  And what happens after that?  The lender builds resentment and the relationship will inevitably turn sour.

That leads to me a story.  A LONG time ago, my uncle borrowed a substantial amount of money from my Grandma and neglected to pay her back.  This was about 20 years ago now, and guess what?  Whenever my uncles name is mentioned around my Grandma, you can see her slowly clench her fist.  Maybe that's an exaggeration, but my Grandma still to this day mentions my uncle in a negative light.

So that is why I don't lend out money to friends or family.  Better to say no at the beginning than to destroy a relationship.

What is your money lending rule?  And no, you can't borrow $20…  :) 

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FT

FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.
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Roberta
9 years ago

If it someone I wish to help out, I give the money as a gift, with the stipulation “Your choice: pay it back, or pass it on.” I decide how much I can afford to give (i.e. Can I afford to lend whatever the asker wants — or only less). When I make my offer, it’s with that caveat, above. This way, if it is returned to me, I’m pleasantly surprised… and if it’s not, I can assume the best about the borrower and not lose any sleep over their personal debt load.

TTCMartin
11 years ago

It was not a cash money lend it was a friend buying a 3 wheeler from me years ago. We had a payment plan of $50 a week. He sent me all the money (i was keeping track) then I get another $50 check in the mail. I called him and told him that was one too many checks. He chuckled and said he was not keeping track. I only would do it with him, do to the fact that we have been best of friends since 1st grade. We are in our late 40’s now. But I have many family members that I would not give a dime too as a loan. I would help them if they were willing to help themselves. Like getting a job for starters.

pjwlk
13 years ago

Fortunately for me, everyone thinks I’m the cheapest prick that ever lived and nobody has the balls to ask me for any money…lol Seriously though, I don’t lend money to anyone as a general rule unless the circumstances are extreme. When the cicumstances warrant it, I will lend what I can afford to lose. Before lending I also ask about the person capacity to repay me and how and when they expect to do so.

A friend of mine always asks for some form of collateral. His most recent example was a guitar that the loanee cherished very much and was probably worth 3 times the $400 loan. My friend states that if he doesn’t receive payment “in his hand” by midnight on some agreed date that the item becomes his to do with as he sees fit. He got his money… that time. A previous time though with the same two fellows the collateral was a nice 10-speed bicycle. The loanee failed to pay on time, no doubt expecting some leanency and my friend then cold-heartedly executed his rights. A few days later the loanee stood in disbelief at my friends doorstep ,money in hand, as my friend announced that he had sold the bike… C’est la vie…

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Aleks
13 years ago

I lend money to family and friends all the time (or have it loaned to me) and it always gets repaid. It probably helps that my friends and family are all fairly good with money and the loans are merely for convenience.

Blain Reinkensmeyer
13 years ago

I will only lend money to certain family members like my brother who I know will pay me back. A few years back I lent my brother $3,000 and it took him a year to pay it back but now recently he lent me a $1,000 when I needed it. I like to think good deeds come back to help you which is true but you definitely need to be working with the right people.

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Mrs. Micah
13 years ago

I don’t expect repayment. And so lend accordingly and communicate this to the borrower. If someone pays me back, it’s a nice surprise. If they don’t, no sweat because I wasn’t expecting it.

Otherwise I think it has the potential to completely ruin relationships. And I’d rather not take a chance on that.