We’ve all done it at least once in our lifetime. Whether it’s a few bucks for gas or a few hundred dollars for rent, we’ve all loaned out money to our friends with the promise of getting it back. Loaning money isn’t bad in moderation, but some people in college get caught in the social traps of loaning out their hard-earned money. Here are three things to keep in mind before you loan out money to your friends.
1) How much are they asking for?
If they just want you to pick up a few things for them at the store with the promise to pay you back, that can be easier to deal with than something that may cost more like rent or textbooks. Problems arise when the amount of money they’re asking for is over a certain reasonable threshold, which is something you have to decide for yourself which is usually if you’re ok with losing given they don’t pay you back. Can you lose $20? $50? It’s up to you and your budget. I’d say anything $20 or less can be easily paid back, but it all comes down to the reliability of the person, which leads to point 2.
2) How reliable is the person?
Please note, this is not a question of friendship. I’m not asking how good of a friend they are, I’m asking how reliable are they? Someone being nice and a good friend does not mean that they are reliable or good at paying back owed money. There are some people that you can loan even $5 and never see again, no matter how nice or sweet they are. My words of wisdom to you on this is: don’t fall for someone’s personable demeanor or kindness; it does not correlate to reliability in financial situations. Only loan out money to someone you know very, very well.
3) What is the money for?
I think this part has to be taken with a grain of salt. Unless you really trust somebody, they may not be truthful when they say what they’re going to use the money for. I’m not saying don’t trust your friends, but be careful. Don’t forget, this is your money. You worked for it, you earned it. You don’t have to give it to anyone just because they’re your friend, especially if your own financial situation is tight. Unless it’s life or death (and if it were, they should go to someone with a more stable career, not a fellow college student), I would be hesitant in the money I loan out.
These three questions are important, but even if you carefully consider them you still may never get your money back. So what do you do?
1) Can you confront them safely?
If you do not feel safe asking for your money back, then that is not a relationship that you need to be in. Period. You should never feel unsafe asking for things, especially if it belongs to you.
2) Can you confront them without drama?
Some friends will try to manipulate you into letting it go. They may give you a sob story about how they don’t have the funds to pay you back. They may cry or try to blame you for being a bad friend. If you’re still reading this, please know that YOU ARE NOT A BAD FRIEND FOR ASKING FOR YOUR MONEY BACK. It is yours and there was a promise that it would be paid back. If it wasn’t paid back, that’s on them, not you. Be firm in your stance and ask them politely for your money back.
3) Can you confront them at all?
Sometimes a person may take your money then ghost you. In this situation, you may just have to chalk it up as a loss and use the experience as a chance to learn from your mistakes.
When writing this article, a lot of people said that I was heartless or that I don’t care about my friends or I’m too stingy with my money. That is NOT true and is a trap that many people fall into. I reiterate you are not obligated to loan out your money to anyone and if someone makes you feel bad about that, then they are not your friend. I’m writing this article so that you will learn from the mistakes of others so you don’t have to be the victim of theft.
Finally, my parting thoughts to keep in mind:
1) Just because someone is nice to you or is your friend does not mean that they are reliable.
2) You earned your money and do not owe it to anyone. Do not let anyone guilt-trip you or manipulate you into giving them money.
3) If the amount they want from you is over a certain reasonable threshold (for me, this is $50) then be very, very cautious. If you feel like you must help them, get it in writing. Date it and ask them to sign it. Set up a payment plan in advance.
4) If they are upset about this, then do not give them money. The only reason they would be upset is if they weren’t planning on paying you back.
Above all, be safe! People can act differently when money becomes involved, even if they seemed like they were your friend. If you ever feel unsafe or scared, seek outside help!