by JLGerardo

Most of us have gone through the heart-wrenching episode of having a friend come to us and plead to lend her some cash. “The check I issued would bounce and I would surely be facing criminal charges if I could not have the money to fund it today.” Her grim countenance, a sob or two, and a heavy sigh complete the scene. Who could refuse such a pitiful sight? So you take your life savings and hand it over to her, trusting at her promise of speedy repayment.

A couple of days later, you accidentally bump into each other. You could hardly recognize her now. She has a terrific hair make-over, a fashionable dress that might have costs a fortune, a pure leather fancy bag, a dazzling gold pendant dangling at her neck, and a high-heeled sandal. To your dismay, she merely gives you a brief, nonchalant look, and hurriedly goes on babbling with her classy friends.

Later, you try to contact her. You call at her cell phone but it was dead. She must have changed her cell number. Not losing valuable time, you proceed to her apartment, only to discover that she had moved out. When you drop by at her workplace, all you get from her are cold stares and a rude brush-off.

So much of being a good Samaritan. Lending money to friends is a great No-no, if you want to maintain your peace and serenity. Here’s why.

1.) CONSEQUENCES OF FINANCIAL IRRESPONSIBILITY

Looking back at the preceding story, you could easily see the glaring fact that the friend in question does not practice good financial management. For why in the world did she issue a post dated check when she knew she had not enough funds to cover it? That’s sheer stupidity. Those friends who mishandle money should learn the bitter consequences of their actions. . Bailing them out does not help them in the long run and will only make their situation worse.

2.) MONEY CAUSES ANIMOSITY BETWEEN FRIENDS

When you lend money to friends and she gives you the flagrant signals that she will not pay, you will feel angry and bitter against her. Too often, the animosity will result in violent confrontation. You may get your money back but you will no longer enjoy the goodwill of that particular person. The easiest way to ruin friendship is to lend them your hard-earned money.

3.) LENDING MONEY TO FRIENDS IS A LOSE-LOSE SITUATION

It’s obvious. Your money earns interests when you put it in a bank. On the other hand, the money to lend to friends is already a throwaway. It’s gone with the wind. In the first place, you will not be charging him with interests because she’s your friend. Secondly, you may not have the heart to demand repayment. So the debt lingers on for years until it’s forgotten. You lose your money. And if she does not pay, you could also lose your respect for her.

4.) LENDING MONEY TO FRIENDS OFTEN PUT WEDGES BETWEEN FAMILY MEMBERS

There are unpleasant repercussions when you lend money to a friend. To begin with, you will get the ire of your family member who has been pestering you for that new MP3, a much-needed cell phone for Junior, or an entry-level home computer to do school assignments. To them, you are not treating them fairly. You adamantly refused them for so long yet easily give in to the financial need of a friend.

5.) LENDING MONEY TO FRIENDS CAUSES STRESS

Most instances, you lend money to a friend not because you want to but because you feel compelled. You do not want to be branded as a heartless, merciless neighbor. So you grudgingly lend money—an act you will regret and cause you stress and sleepless nights.

But wait. We are not advocating that you completely lose your goodwill and concern for mankind. When we say that you should not lend money to friends, we mean considerable amount of money or your life savings. Occasional giving out $100 to friends in need without noting it in your little blue book is commendable. By then, it’s no longer a debt; it’s assistance.

But as Fate would have it, there are really times when we really want to lend money to friend’s dire need. When you do lend cash, minimize your risks by considering the following guidelines:

1.) LEND ONLY WHAT YOU CAN AFFORD

If your friend wants to borrow $500 and you have only $150 in your wallet, don’t go to the extreme of pawning your mother’s heirloom or making out ATM withdrawals. Show your friend your wallet and tell her that’s only the cash you have. Either she take it or leave it. Never, ever lend more than you have at the moment.

2.) BE DISCERNING

When your friend tells you that she needs the money to buy medicines, then go with her and buy the medicine together. The point is, you should make sure the money will go to the intended emergency and not just an alibi to bleed some cash for personal whims.

3.) REQUEST FOR AN EXCHANGE

You are not a pawnshop owner but lending money demands that you exercise pawnshop practices. If she wants to borrow money from you, request that she gives some form of collateral. Maybe those silver earrings or that gold bracelet on her wrists. If she really is in a dire need, she will readily consent to such a fair arrangement. Anyway, she can have her “belongings” back as soon as she pays what she owes you.

I’ve been dating a man for 3 months; he’s polite, considerate and generally very supportive. He was let go from his job a month ago and has no savings to fall back on. He has been looking hard for work, but in his field there’s not much just before the holidays.

He recently asked me if he could borrow $1,000 from me. I told him that I needed to think about it. I have savings and can spare the money right now. However, I’ve had bad experiences when it comes to lending money to men that I have dated. I swore I’d never to do it again. He is not at all like the men I have dated in the past and I do want to help him. Are there boundaries I can set or a way to protect myself in order to get the money back if I loan it to him?

ANSWER

VICKI:
When loaning or giving money, items, time or anything else of value, the rule is never loan what you cannot afford to lose. Keep in mind that you need to think for the future and not the present. If you lost this $1,000 would you still have enough in your savings for an emergency; for example would it make a difference if you lost your employment and couldn’t find work again for six months?

With that said, I stumbled upon a great article called, The Best Ways To Loan Money To Friends And Family from Geri Detweiler for credit.com. It covers all the important issues of setting a fair interest rate, getting an agreement in writing and setting up a formal payment arrangement.

If you do not choose to lend your boyfriend money you may think of employing him to do some odd jobs that you need done such as renovations including house painting. This way he has earned the money and there is nothing to be paid back.

No matter which you choose, remember that you must be true to yourself and make sure that you are taken care of. Your boyfriend’s present predicament is a great example of this.

JILL:
Even though you asked about boundaries and ways to protect yourself, I would like to address whether or not you should lend the money. So here are a few things to think about.

1. Why have you been able to accumulate savings but he hasn’t?
2. Would you ask a boyfriend of 3 months for $1,000-?
3. Pretend for a minute that he didn’t ask for any money, would you be perturbed by the other facts; that he is out of work, has no money to fall back on and cannot find work at this time of year?
4. What will you do if he doesn’t find work, cannot pay you back or asks for more?

I understand that everyone falls on difficult times and sometimes all they need is a helping hand. I just want to make sure that you have looked at the situation from all the angles. Things are currently unstable economically; you must make sure that you protect yourself first.