Ask these 3 questions before you lend to a friend.

Let’s be honest with each other: no one really likes being asked for money.  There is something that makes our skin crawl every time someone asks us for our hard earned dollars.  Of course, if it’s someone we like, we are more than happy to do it... sometimes.  However, what about the times we just don’t want to?  Here are the questions you need to ask yourself before you lend money to a friend.

  1. Do you have it give? This seems like a no-brainer, but clearly there are people out here giving the shirt off their back and then having to ask someone else to come out of pocket for them.  It’s a vicious cycle.  My mother gave me a great piece of advice about this when I was growing up.  She said, “If you can’t afford for them not to pay you back, then you can’t afford to give it.” I live by that.  If I can’t feed myself to help you pay your insurance, then you can’t have it.

  2. What’s your philosophy on repayment? Before you take a loan out with a bank, they make it very clear what the terms of repayment.  What’s the interest? What term of time? Penalty? All laid out in the not-so-fine print. If you don’t know your terms, it’s unfair to both parties involved.  Before you hand over the $, make sure you have gone over how you expect to be paid back.  If they don’t agree, don’t part with your cash!

  3. Worst case scenario, What if they don’t pay you back? Check it.  No one wants to think about this, but it’s a hard truth.  Some of our dearest friends and most treasured loved ones are not responsible borrows.  That’s probably why they are coming to you.  So if they do you like they did the bank, credit card company, or landlord, how will that affect the relationship?  Will it damage trust? Will you be able to forgive them?  Could you move past it? If your friend not paying you back would kill the relationship, you might not want to jump down that hole.

Having a very frank and honest conversation with yourself about this topic will save you a lot of heartache and financial loss in the long run.  Don’t be afraid to stand up for yourself, even if this friend or family member tries to guilt you. You are the only person on the planet responsible for you.  The folk that love you will respect whatever decision you make, trust.