Reasons why you should not lend money to your friend

Why shouldn’t we lend money to a friend? Polonius answers that in his next line: “For loan oft loses both itself and friend.” Polonius knew that a loan to a friend often results in the loss of both the money and the relationship.

This is actually true. I had a friend who asked me for money so he could buy a skin for his game. I was hesitant at first since I am on a tight budget and his reason for borrowing money is not really important compare to my needs for food and bills to pay especially my rent since my mother couldn’t help me with my allowance at that time. I had a job and the salary was enough for my school tuition, food, bills, and rent. Since I would do anything for this friend and trusted him. I lent him some money. One day I lost my job and had nothing to eat since I prioritized all my bills first. He has a job and a rich lifestyle and asked him to pay me back as he promised once he got a job. He blocked and Ignored me and I was so mad and that’s how the friendship ended.

Here are the reasons that I learned why you should not lend money to a friend:

1. Open-ended Loans

Loans to family and friends tend to be open-ended. The parties don’t reach an agreement for a timeline for repayments, and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans.

This leaves both parties in limbo and doesn’t set any expectations. The uncertainty can lead to stress as the borrower may worry that the lender expects payment and the lender worries about when he or she will be repaid.

2. Loans Are Not a Priority

With an open-ended loan, the borrower may not realize that there is a sense of urgency to repay the loan. Without a deadline, repaying the loan becomes the borrower’s last priority. The borrower won’t face any repercussions for not repaying the loan, like late payments, higher interest fees, or a negative impact on a credit score. Without the threat of penalties, the borrower has no motivation to take the loan seriously or to put any urgency around repaying it.

3. It’s Difficult to Ask for the Money Back

It can be difficult to request repayment of a loan from a friend. More than likely, the lender cares about the borrower and doesn’t want the borrower to feel awkward. The lender may continue to worry about loan repayment and thus shut down some or all communications with the borrower in order to avoid talking about the loan. The borrower becomes confused and hurt feelings can result.

4. You Might Need the Money

You definitely want your money returned, but you may also need your money. What if you lose your job and you have no income? What if you spend your entire emergency fund while searching for a new job? What if you need to put food on the table? Not receiving repayment of the loan in a timely manner might spell disaster for you.

5. You Could Lose Your Money and Relationship

As Shakespeare wrote, “For loan oft loses both itself and friend.” If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. This will cause tension between you and the borrower, and may also cause guilt, remorse, and anger.

Final Word

Even though you want to be a good person, and you want to take care of your friend, don’t lend him or her money if you can help it. Gently refuse the loan, and determine the best way to help your friend, instead of enabling them.

Sometimes caring for someone involves doing something that they do not want, and they may be disappointed or mad. But if you have their best interests in mind, you can rest easier knowing you won’t jeopardize your relationship. If you can afford to loan money to a friend, have an open and honest conversation to discuss any potential problems with the loan. Most of the time, issues related to these types of personal loans can be quickly resolved with a frank discussion.

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