Loaning Money To Friends

[ks8829]

I had a good friend ask to borrow a couple of thousand dollars yesterday since his money is tied up for some of his living expenses. I was shocked to hear him ask me but also careful not to loan money out to friends.

I had my brother in law ask to borrow $5,000 about 5 years ago for his business. My wife and I loan him the money and he has not even once attempted to pay me back. He goes on vacations and buy golf equipment. I have to ask him for the money back before I eat my liver.

[Stretch]

Nothing ruins a friendship faster than money owing/owed.

As far as your BIL goes, write it off to experience. If he hasn't tried to pay you back in five years, he surely has no intention of ever doing so.

[wrx_junki]

Yeah don't do it unless it's a dire emergency. Lent a close friend 20 grand in cash for his business and got about half of it back but still haven't seen the other half. I just don't think it's good for the friendship. I lend up to a grand but only to people who have an income and have good history of paying back on time. I can't stand being in debt to a friend be it $5 or $500, have to go out of my way to pay it back ASAP but doesn't seem like everyone is wired the same. I know what you mean about your friend. I had a friend who used to spend all his money on his car and his luxuries then when it comes to go out with friends for drinks/food, he'd expect everyone else to pick up the tab because he's "poor". He'd probably tell you the same.

[billysandy]

I think it can ruin friendships if it gets complicated so I will always be avoiding it. That BIL really sounds like a piece of work. I would get him to pay you $400 dollars a month till it is all back.

[Valleygolfer]

I had a good friend ask to borrow a couple of thousand dollars yesterday since his money is tied up for some of his living expenses. I was shocked to hear him ask me but also careful not to loan money out to friends.

I would start talking to him about your stock in his business and since this is a partnership, you are thinking of making some changes in it since doesn't seem to be paying you any dividends.

[TourSpoon]

I was told a long time ago that you never loan money that you can't afford to part with. I have had similar experiences happen so I try to avoid it or I will just give it to them but not on a large scale. That is what banks are for.

[alf174]

I had a good friend ask to borrow a couple of thousand dollars yesterday since his money is tied up for some of his living expenses. I was shocked to hear him ask me but also careful not to loan money out to friends.

Tell your friend outright that you'd be afraid of the damage that would occur if the loan wasn't paid back and if he wants to continue with the process is there some kind of collateral that he could put up or sign a formal loan document.

As far as your BIL, start dropping hints/tidbits that you haven't forgotten about it. I would say in casual conversation "Hey [BIL], do you remember that $5000 loan? Have you thought about how I might be able to get that back?". You'll have to pick your time and exact wording carefully so as not to ruffle too many feathers. Of course, this is how I handle it with money, up front and to the point so that there isn't any misconceptions later.

[leezer99]

Give him half the money and an application for a part time position at Starbucks.

[kpaulhus]

Formal documents. I prefer not to lend money to friends, but If I do, Im not getting screwed in the end.

[Fat Slice]

I don't do it anymore. I loaned $20K to a close friend and got an $8K car back as payment that I then had to smog and sell on my own. The rest of the cash? Forget about it - I'll never see it just as I will never see that ex 'friend.'

One of my *best* friends wanted to borrow a much larger sum in order to close some deal...I had to tell him no, which rankled him a bit. My instincts were right, the guy got in way over his head, lost his house, lost his commercial buildings, is in debt and being sued by everyone. Even now he admits he would never have been able to pay me back.

I took both those situations as lessons - one expensive, one free: If a friend is not solvent enough to get a bank loan then there's NO WAY I should be putting my family's money at risk by loaning it to them.

[ghalfaire]

My best advice is don't do it. If you do don't expect the money back and expect to lose a friend with hard feeling. The reason "friends" ask for a loan is that they don't pay their debts and that is why they go to you instead of a bank. So you might lose a friend if you don't make the loan, but you likely lose the friend in any case so don't add lost money as an issue.

[The Road Dog]

Everybody is different but handling money requires the same approach. If you have money and have enough to lend it's because you are careful with it. Protect yourself if you chose to lend it. Collateral you can hold and dispose of easily is the way I'd choose to protect myself. Oh and I'll never lend to family with one exception, my kids.

[newtogolf]

I prefer not to lend money to friends, or employees, but if I do, I make it legal. I have our legal counsel draft an agreement with payment terms, then have them sign and notorize it so that I have a legal document that I can take to court.

Short of a personal tragedy, a friend that doesn't pay you back isn't really a friend so I have no issue with taking them to court.

[sean_miller]

Give him half the money and an application for a part time position at Starbucks.

You know what's cheaper? Get him to do a budget and justify why he needs precisely $2000.

[golfro]

You know what's cheaper? Get him to do a budget and justify why he needs precisely $2000.

exactly what i did. friend of mine asked me to invest a few thousand on a business venture a couple years ago. having been part of startups and my own business, he thought i'd understand what its like to start a business.

i in turn, asked that he budgets out the exact costs and where he intends on spending that $3000 or so, down to a single cent with a sound business plan, etc. you can guess he never got me that budget plan and never asked for money again.

[iacas]

The rare times I need to borrow money (typically "awww, crap, I forgot my wallet" when we're at a food joint or something) it's well under $50 and I pay it back - rounded up to the nearest $5 or $10 - basically as soon as I have the chance to get to a computer or something. Or I pay for something else on the way home or something. I hate hate hate the feeling of owing anyone money.

I'll also loan money to friends on occasion. But I do it with one expectation: that I won't be paid back. In that sense, I tell them it's a "loan" but I look at it as a gift on my end. If they "return" the gift at a later time, good. And no, none of my friends have ever gotten cash gifts of several thousand dollars or more.

In other words, smaller amounts I'll consider. Larger amounts, no way, not even with paperwork.

[GaijinGolfer]

Loaning money to a friend is NEVER a good idea.

[ghalfaire]

My best advice is don't do it. If you do don't expect the money back and expect to lose a friend with hard feeling. The reason "friends" ask for a loan is that they don't pay their debts and that is why they go to you instead of a bank. So you might lose a friend if you don't make the loan, but you likely lose the friend in any case so don't add lost money as an issue.

I was talking about loans of "significant" amounts and had not thought about forgetting my wallet. Like iacas I have forgotten my wallet and needed a loan (got it and paid it back) and have been on the other side of that and made a loan (and was paid back). Those are things that friends do for each other without a thought and should do for each other. But it is good advice to not make any significant loan to friends and if you do make it "official" with paper work and collateral. Otherwise it has been my experience that you won't ever see the money again and probably not the friend either.