Loaning Money to Family and Friends

I learned early in life that loaning money to family and friends could ruin valuable relationships. It is not the best idea to loan money to friends and family if you do not have it to lose. I personally feel that the best thing to do is to give the person in need the money as a gift not a “loan.” Back in college I had a good friend that did not have a job and depended upon family members to pay his rent until he found a job. That friend ended up falling 2 months behind on his rent and he asked me if I could loan him $300.00 until our financial aid checks came in. I was pretty good with my finances and figured I would help a good friend, so I did. I never received that money back from that friend; instead I received every excuse in the book of why he did not have it.

According to Rao (2010) there are ways you can go about lending money to family and friends. The best way to go about lending family or friends money is to treat it as a business deal, which includes adding interest. From my experience I stand behind not loaning family or friends money, if I have it, I rather give it to them as a gift to prevent the possibility of ruining that relationship. Times are hard for a lot of people right now so the calls may be coming in. If you decide to open that checkbook for that person that is calling with their story, please consider writing the check as a gift first.

~Cortez