Lending Money to Friends and Family – Just Say No!

  1. Don't lend if you love themDon’t do it! More often than not, lending money to a friend or family member results in a strained relationship or the end of a relationship.
  2. If you do decide to lend money to a friend or family member, lend only an amount you can live without and don’t expect it to be repaid.  In your own mind, consider it a gift and if they pay you back, great, if they don’t, it does not create a financial hardship for you.
  3. Don’t lend money to friends or family members!  It is difficult to keep asking them to repay you if they don’t meet their promised deadline, which is what happens most of the time.  Since you are a family member or friend, they may expect you to wait until they are ready to repay (if they ever do) – even if you now need the money.  Yes – I see it happen all the time!
  4. Ok, so what if you decide to ignore #1, #2 and #3?   If you decide to lend a larger amount than you can afford to lose or give as a gift, then protect yourself and make it a formal loan agreement.  Have a promissory note that includes the amount you are lending them, the dates and amounts of repayment, for example monthly installments and/or a final repayment date, interest, and penalties if they don’t pay on time.  Have it signed by them, dated and notarized so they see you mean business; you want to be repaid in full on a timely basis.  You are also encouraging responsibility on their end – which never hurts.
  5. Don’t lend money to friends or family members!
  6. Don’t co-sign for a friend or family member; it is similar to making a loan.  If they don’t pay their bills on time, it will be reported on your credit report.   If they don’t pay the bills at all or declare bankruptcy, you are on the hook to pay for any amounts still owed.
  7. Love your friends and family, but don’t lend them money or co-sign for them. 
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