Lending money to a friend in need seems like an act of kindness, but it could cost you your friendship down the road.
This has always been a sticky issue: Friendship and money. Where do we draw the line? What do you say — and do — when a friend comes to you for financial help? After all, they do say that a friend in need is a friend indeed, right?
But when money is involved, it is unfortunately not so straightforward. Let’s face it, money may make the world go round, but it can also cause your friendship come to a screeching halt. Say “no”, and you feel guilt stricken. Say “yes”, and you may regret it.
There are many ways of helping someone out without talking cents and dollars. Here are just five reasons why we think it’s a bad idea to loan your friends money.
You May Never Get Your Money Back
This should be a simple deal: If you borrow money, you pay it back; if you loan someone money, you ought to get it back. Now if only it’s that simple in reality.
When friends borrow money, there is a number of possible scenarios: Maybe they’re out of work, maybe they’re going through a divorce, maybe they’re ill, or perhaps their business failed.
It probably feels like the right and compassionate thing to do: Give your friend a hand to tide her/him over a rough patch. Because you’re friends, there is no reason that they would “run away”. Again, that’s the ideal situation.
But neither you nor your friend knows what the future holds. He or she may not have the means to pay you back any time soon. “Reminding” them is just going to make things awkward and uncomfortable.
In the end, you might find yourself saying bye bye not just to your money but quite possibly also your friendship.
Are You Really Helping Though?
So you want to be a good friend and write him/her a cheque. It makes your inner altruist feel good. But is your little good deed truly in your friend’s best interest?
What if you’re feeding a bad habit, such as gambling or a shopping addiction, you don’t know about? What if your “help” only weakens his/her resolve?
You know the saying: Sometimes you need to be cruel to be kind. Maybe what he/she needs is to toughen up and find a better, more permanent solution. So saying “no” could actually be the kinder act.
Money Changes Everything
Like it or not, when you lend a friend money, the dynamics of the friendship is bound to change. Instead of being equals, the borrower now indebted to you, the lender, will likely feel obliged to please you, or fear offending you.
Case in point: Your friend has been out of work for a while now, and asks for a S$500 loan to keep themselves fed over the next month. One week later, both of you show up at the same group gathering, where the bill is S$60 per head.
How would you feel? And how do you think they feel? Things will never quite be the same again. Are you willing to deal with that?
What if They Ask for More?
Borrowing money rarely stops at one request. Once they’ve successfully borrowed money from you, there’s a chance they might return for a second, or third helping. And with each request you agree to, you'll find it harder and harder to say no.
It might also be possible that other friends or family members, once they catch wind of your willingness to loan money, might approach you for “help”, too. What are you going to do then?
You Might Need the Money
What happens if you’re met with a situation that requires you to turn to your emergency fund or savings, which you had dipped into in order to lend your friend a helping hand?
What if you suddenly lose your job and need to rely on your savings? If that happens, you’re going to be seriously stressed out and even mad at your friend for not paying you back, and putting you in a bind.
That's a possibility because nobody can predict the future. It’s best you keep your money for your own rainy days.
Read This Next:
Money Advice You Wish You’d Told Your 18-year-old Self
4 Ways Your Friends Are Ruining Your Finances
By Alexa Fang
Alexa is a pop-culture vulture. She lives to read, write and travel, and decided long ago that life is stranger than fiction. When she's having croissant, she thinks in French. "31 Rue Cambon" is her favourite address, and she believes that money one enjoyed spending is never money wasted.