Lending money to family and friends

I was reading an interesting post at Well Heeled Blog and I thought I’ll share a similar experience I had years back.

The general consensus is it is a very bad idea. I learnt this the hard way.

I had a very good friend whom I had lost touch with. One day out of the blue he came on IM and he asked me for a thousand dollars since he had moved out of the country and was doing badly financially.

I knew him well (or so I thought) and didn’t think twice before rushing a check for a thousand dollars. Didn’t ask him when he’s going to return it; he didn’t tell me when he’ll repay back.

He thanked me and we were in touch via email and chat and neither of us would bring up this topic. Months turned to years and one day I decided to ask him if he was in a position to repay. (I knew he was since he had moved out and had a good, decent job and was doing well). I got no reply. A few days later, I reminded him again about this. He suddenly disappeared from IM. He stopped responding to emails.

To this day I have no idea why he behaved the way he did. Had he asked for more time, I would’ve gladly said yes. I wasn’t even asking for interest and would’ve been perfectly fine if he were to pay in small increments.

In the end, I managed to get a portion of my money, lost a good friend and was out a good chunk of the thousand dollars.

Here’s my thought on this subject – don’t lend money to family or friends if you cannot afford to lose it. People have strange ideas about money which might be very different from what you think.

Have you had a similar experience? What’s your thought on this subject?

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7 thoughts on “Lending money to family and friends

  1. My thought is that you should just consider it a gift because if it is not paid off quickly, it will just result in anger and possibly a destroyed relationship. (as you know)

    I did borrow money from a friend once when I was 21 for a car. I paid it off in 3 months and I hated feeling in debt. I never borrowed money from a friend or relative again.
    .-= Everyday Tips´s last blog ..I Am Mastering Time Management! =-.

  2. I had a similar experience, except I was actually scammed by my friend. She claimed to have been robbed (she had just moved to a larger city), and out of pity, I quickly loaned her a good sum of money. Needless to say, turns out she made up the robbery, and for her new-found money, she lost a friend. Now, I agree with you; never loan out money to friends and family, if you can’t afford to lose it.
    .-= Jessica07´s last blog ..Leisure Suit and Alligator Boots- Reading the Fine Print In Contracts =-.

  3. @Jessica: Ouch! You are better off not having such friends!

    @Everyday Tips: Friends who pay back debts are a rare breed!

  4. Lending money to family and friends http://bte.tc/fbzX #RTW

  5. @MoneyCone: Hmmm… I wonder what comment I need to leave to illicit and “Ouch!” response from you again. Ha-ha. I loved that.
    .-= Jessica07´s last blog ..Making Work at Home Work for You- The Basics =-.

  6. Lending money to family and friends http://bte.tc/fbzX #RTW

  7. I agree – I only lend out money if I can afford to give it up. I lent my sister money and I’m still bugging her to pay me back – I think she will, it’ll just take time. It’s not that I need the money back but that she agreed to pay me back and I’m holding her to it (which she’s okay with). I would be really hesitant to lend money to a friend – I’d just think of it as a gift instead.

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