A friend called recently and, after some casual chatter about life and work, asked if she could borrow $2000 or more if I could afford it.
uncertain
I → call → it
She “hoped” to pay me back $20 a fortnight.
asserted
She → hop → 20
I knew straight away that I was going to say no.
asserted
I → know → ?
Don’t get me wrong.
asserted
me → get → ?
I care about her, but I only hear from her every couple of years, so we’re not close friends.
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we → care → years
And I knew I’d never see the money again.
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I → know → money
I’ve also watched her make several dubious financial decisions over the past two decades.
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her → watch → decades
She owned a lovely house when we met, but sold it and lived off the proceeds, which has now all been spent.
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which → own → proceeds
She now lives with her adult son, and has been in and out of casual work for years.
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She → live → years
While I worry about her, she was about to start paid work again, and I knew family could look after her.
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family → worry → her
I also have my own financial commitments, including school fees and a second teenager weeks away from getting braces.
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I → have → braces
On the other hand, I have another friend with a sick husband and three kids, and I’ve offered to loan her money anytime.
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I → have → money
She’s always declined.
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She → decline → ?
Stretching the friendship
Mixing money with friendship carries a high risk of strain, awkwardness and resentment if repayment fails.
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repayment → stretch → strain
Ask Financial expert Melissa Browne, who agreed to loan almost $300,000 to a friend on the proviso that it was for six weeks.
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it → ask → weeks
The money was intended as a bridging loan for a business.
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money → intend → business
But it took several hard conversations and an agonising two-year wait for the money to be fully repaid.
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money → take → conversations
“It was extraordinarily stressful because the money had been set aside for another purpose.
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money → set → purpose
I felt so stupid afterwards, but we were good friends, and you trust your friends when they say they will pay you back quickly.”
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they → feel → you
Remember, one of the biggest risks of loaning money to friends is the impact on the relationship itself.
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one → remember → relationship
Browne admits the situation damaged the friendship forever.
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situation → admit → friendship
“We still talk, but it’s strained things.”
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it → talk → ?
The experience taught her never to loan such a substantial amount again.
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experience → teach → amount
If she were to lend smaller amounts, she would get it in writing.
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she → lend → writing
If you’re in the same position, make sure you’re looking after your own financial needs first.
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you → ’re → needs
Consider how much money you have coming in, bills and living costs, savings goals and what you can give without being left short.
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you → consider → what
Before lending money, consider whether the money will actually help them, says Deb Shroot is a financial counsellor at Financial Counselling Australia.
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Shroot → lend → Australia
Only lend money to a friend if you can genuinely afford not to be repaid.
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you → lend → friend
“While your friend may have every intention of repaying you, their circumstances may make that difficult or impossible,” Shroot says.
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Shroot → have → you
It’s also worth considering whether a loan addresses the underlying problem.
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loan → ’ → problem
Remember, one of the biggest risks of loaning money to friends is the impact on the relationship itself.
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one → remember → relationship
Lending money between friends can be highly emotional.
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Lending → lend → friends
Even when everyone starts with the best intentions, disagreements about repayment, changing circumstances or unmet expectations can place significant strain on a friendship.
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disagreements → start → friendship
If you’re in a position to help a friend who might be struggling, firstly consider whether a bank would loan your friend money.
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bank → ’re → money
If the answer is no, there’s probably a good reason.
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answer → ’ → ?
Also, consider whether your friend is generally financially responsible, and whether this is just a one-off crisis, or if it demonstrates a broader pattern of financial irresponsibility.
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it → consider → irresponsibility
Golden rules for lending money to friends:
- Only lend what you’re prepared to lose: There is possibility that your friend won’t pay you back, which could leave you short.
- Consider lending less: You are under no obligation to lend the full amount.
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You → lend → amount
Consider how much you’re prepared to loan, if any, and be prepared to say no.
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you → consider → much
- Know how your money will be spent: Ask what the money will be used for.
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money → know → what
If your friend wants to use the funds to buy something frivolous, it’s OK to say no.
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it → want → something
…and 2 more, not listed.
The Aporia
