You love your friends and family, and you’d do absolutely anything to help them.
Then one day, your friend is late on rent and asks to borrow N50,000 from you. He promises to pay you back when he gets his next paycheck, but you’re not so sure.
You’re worried that loaning out money could put a strain on your relationship — but you really want to help your friend in his time of need.
What should you do?
Just say no
As someone who’s been burned by loaning money to loved ones, I highly caution you against it.
You see: When you lend money, your relationship is going to change. Your friend will feel indebted to you (because he will be). Hanging out together will feel awkward until the loan is paid off — and if the loan goes unpaid, your relationship could be ruined. There’s so much that can go wrong when you decide to loan money to family and friends.
Instead of giving out money, tell your friend how much you’d like to help but that you don’t have the money or don’t want to ruin your relationship.
Take it from me: It’s a horrible feeling to know money has ruined one of your relationships.
Or give the money away
I know what it’s like to want to help a loved one. Especially when you recognize that help is truly needed, it’s hard to stand by and watch. But here’s the thing: If your friend has fallen on financial hardships, it’s pretty unlikely that he’s going to be able to pay you back.
If you have the resources, just give them the money — no strings attached. Tell your friend to pay it forward one day, when he’s in the position to do so.
If you must loan, get it in writing
If you don’t have the ability to give away money, and really want to help them, then be sure to get your loan terms in writing.
A funny thing happens when you loan money: The borrower and lender seem to remember the original circumstances differently. Or at least that’s what happened to me.
To prevent confusion and possible arguments, get the loan amount, payment terms, and interest in writing. Have both parties sign the contract, with a copy for each to keep. Now when any questions pop up, you can just refer to the signed contract.
Be aware that there are some serious consequences to loaning money to friends and family. Even though all intentions may be good in the beginning, things can go sour quickly. Before you open up your wallet, make sure you know what you’re getting into.