Should I Lend Money to a Friend or Family Member?

Sheri Cyprus
Sheri Cyprus
If you lend money, write up an agreement spelling out payment terms.
If you lend money, write up an agreement spelling out payment terms.

Deciding whether to lend money to a friend or family member is tough. On the one hand, you want to help a person you care about, but on the other hand, you wonder if it is really a good idea to lend money to this person. The two main things to remember when deciding whether or not to lend money are to think before you do it and not to lend money that you need yourself.

First, realize that you don't need to feel guilty if you don't want to lend your money to anyone, even a friend or relative. If there is a reason behind the guilt such as they did something for you and helped you out when you needed it then you may really want to lend them money. If you have the money and want to do it then you can do it.

If you do decide that you want to lend money, be sure to write up an agreement. It doesn't matter if it's your sister or the best friend you've know for decades, a clear agreement signed by both parties is important. It's not a matter of trust, but a clear understanding of what is expected. The agreement should have dates and specific amounts for repayment.

If you are low on money yourself you simply may not be in the position to lend money. You really should never lend money that you need yourself. If something happens and your friend or family member can't pay back the money, you've put yourself in a dangerous position. A friend or relative that cares about you should understand that and not make you feel pressured to lend money to him or her.

Many financial experts say that the only circumstances in which a person should ever lend money is if they really don't need the funds and really won't expect the money back. Otherwise the lender is at risk. You can also decide on the reason for the money. A single mom struggling between pay checks is one thing, while money needed to buy a big-screen TV is a totally different thing.

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Discussion Comments


You should never offer to help out a friend if you have no intention of helping them. It's like watching some one drowning, offering them your hand, and jerking it away suddenly because you think they may pull you under with them.

It is much better to just say "I am sorry you are having problems, but I can't afford to help you out". You will have your wealth intact, but you will surely lose a friend.

Being in a financial crunch is bad enough without having your friend saying I don't trust you to make good on a loan.

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    • If you lend money, write up an agreement spelling out payment terms.
      By: gloszilla
      If you lend money, write up an agreement spelling out payment terms.