SolveYourProblem
Home Loan & Home Mortgage Article Series
Loaning
Money to Your Best Friend
I’m
sure that you heard the old adage never mix business with
pleasure. Most people prefer to keep their
personal and professional lives separate, particularly where
money is involved. Poor business decisions or ventures can
lead to a rupturing of a friendship and the same holds true
in a money-lending situation. Many good friendships have been
lost because money has been lent and then misspent or not repaid.
But what about situations when there is no one else to turn
to? You’re desperate for money and your best friend offers
their assistance. Can you afford to turn him or her down? Or
what about the reverse – one of your closet friends comes to
you with a financial problem and asks for your assistance because
they have no other options? Would you feel right turning them
away? How can you avoid falling into the pitfalls of mixing
friendship and money as either the lender or the borrower?
Here are a few tips on how to approach a loaning situation
between friends.
Eliminate All Other Options
Before you accept money from a friend or offer money to a
friend, make sure that there aren’t any other options you can
pursue. Maybe one bank has turned you down, but have you really
tried all of them? Is there another money lending companies
that will work for your situation? Have you cut back your expenses
to the absolute minimum or are there some non-essential items
that you can do without? One of the best things to do is sit
down and figure out a monthly budget. Write down the amount
of money you have coming in and then subtract only those things
that are absolutely essential for your survival. You might
find more money that you thought you had just because you took
the time to map out your monthly spending. The most important
things to keep in mind is that borrowing from friends should
be your last option, not your first. If you can get it from
someone or somewhere else, then you should.
Treat it Like the Business Arrangement it is
What most people fail to do is treat this kind of loan like
the business arrangement it is. You must outline in writing
the amount being borrowed, the time frame for repayment and
the amount of interest (if any) that will be included in the
repayment. If you do not have a solid agreement like this in
place, it is far too easy to get complacent about the situation.
Be Wise in Your Spending After Borrowing Money from a Friend
This may seem like an obvious point, but you’d be surprised
how much of a problem this can become. Most friends don’t mind
lending the money and helping someone out, but it can be very
aggravating to believe that money is being misspent. Put yourself
in the lender’s position. Just say you lend money to your best
friend, Sarah, to help her pay off her credit card debt. If
after lending her the money, you see her spending money on
non-essential items like cosmetics or shoes instead of increasing
her payments back to you, wouldn’t you be a little upset?
If you’ve borrowed money from anyone – be it a bank or a friend
– your first priority is to pay that money back. There will
still be plenty of time for life’s little pleasures and luxuries
once that debt is settled. And if your the lender, don’t let
your frustration build up – make your feelings heard and let
your friend know in the nicest way possible that you need your
money back as soon as they can spare it.
Pay it back!
No matter how long it takes, you need to pay the money back.
If it takes longer than you anticipated, then it is important
to talk to your friend and explain the circumstances. Most
people will understand if there are good reasons for the delay.
If there is a rupture or end to the friendship before all
the money is paid back, it is still important that all of the
money be returned. There is no way to salvage the friendship
or your good name if you do not settle your debts.
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SolveYourProblem.com : 2007
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