Handling Friends Who Borrow Money

46 comments

Updated: March 28, 2023

You’ve been doing a lot of changes to improve your financial health. You’re proud of your accomplishments and your friends could tell that you’re doing well.

Then one day, a friend confides that he’s been having money problems and hopes that you could help him by lending him some cash.

What do you do? Do you immediately dig into your pocket and help your friend?

Or do you simply keep quiet and pretend you didn’t hear anything and change the topic of the conversation?

It takes a special bond among friends before they could comfortably talk and be open about each other’s financial problems.

If you find yourself in this situation with someone you barely know (which I’ve seen happen), then the best advise is to simply say, “I’m sorry, but as a rule, I don’t lend money to friends.”

This statement is straightforward and gives your message without attacking the character of the person.

borrow-money

But how about those friends you’ve known for years? Do you treat them the same way or do you give in to their request for the sake of friendship?

You say to yourself, “Friendship is more important than money; it takes time to gain friends but money, you can easily earn with your income.”

I believe that this is true, but I also believe that in most cases, allowing them to borrow your money is not the best way to help your friend.

So how do you know when it’s best to lend out your cash? And how will it affect your personal finances?

When a friend wants to borrow money from you, ask where it’s gonna be used. Be serious with the question but genuinely show concern over his financial troubles. You want to get the most honest possible answer.

After he relates his situation, it’s best to say that you would have to consult your budget if you can afford to lend him the amount he needs.

Wait it out for at least two or three days. This will give your friend time to look for other ways to get the money while you try to learn more about his situation from other friends and his family.

What to do when a friend is borrowing money

Your first judgment call is to decide if your friend deserves the loan. The harsh truth is that sometimes, the money is simply being used to fuel an addiction.

This does not necessarily mean illegal drugs but more often a frivolous obsession like keeping up with fads or maintaining a hobby that’s too expensive for him.

If you find your friend complaining about his financial woes while he’s drinking a Starbucks Frappuccino, then there’s definitely something wrong there.

Special situations involve medical emergencies and business proposals. With the first case, I know that it’s really hard to refuse when the life of a person is involved, but immediately giving in to the request is like buying on impulse.

There could have been a cheaper alternative or the situation was not really serious in the first place. So it pays to take stock of the situation and know you and your friend’s options first.

When a friend is asking money from you to start or expand a business, then you would have to clarify if he’s asking you for a loan or he’s inviting you to be an investor.

The first one, you’re expected to be paid back but the second one, you’ll be sharing in the company’s profits instead. This situation calls for more extensive evaluation especially if you’re being asked to be an investor.

In general, the fastest way to give a judgment call whether your friend deserves the loan or not is to examine his entrepreneurial skills.

Does he have what it takes to make this business successful? Did he do extensive studies and carefully planned out this venture?

If the answers are yes, then I think that it’s worth giving your friend more attention and consider a business partnership.

If your friend has valid and acceptable reasons for borrowing money, then your next judgment call is to determine if you can afford it or not.

However, if you don’t have a working budget for your expenses. Then I suggest that you make one before you lend out your money.

By having a clear picture of your own financial situation, you do not risk having money problems of your own in the end. It’s best to take out this expense from your entertainment budget.

Be sure on the amount you could afford to give, this is more important than how much your friend really needs. In the end, no matter the amount you gave, a true friend will deeply appreciate the sacrifice.

Before you say YES

Are you ready to give the money to your friend? I suggest that you ask yourself first some questions.

First, can you picture what would happen if your friend doesn’t pay you back?

How will that affect and change the relationship? Could you live with the possible consequences? If he comes back to you to borrow more money which you could no longer afford to give, are you prepared to say “no” this time?

Congratulations, you just prepared yourself for the worst case scenario. If you cannot find resolve with the previous questions, then I suggest that you reconsider your decision and perhaps try to help your friend through another way.

It may also help to be honest and open with your friend and ask how exactly is he planning to pay you back. Where will he get the money? Will he be paying through installment or as lump sum? What will be the payment schedule?

When the amount is considerably big, it’s best to get everything in writing. A lot of people get “amnesia” whenever they borrow money.

It’s not rude to ask for a collateral or ask them to issue post-dated checks. Especially if this is a business transaction, it is necessary to get all legal documents ready to avoid future conflicts in the partnership.

In the end, when everything goes well, you can use that contract as a testament to your genuine friendship.

If you have to say NO

I think that it would be far worse to hound your friend for the money than it would be to say NO from the start. Make your friend understand your situation and explain to him your own financial goals.

If you think that your friend’s reasons for the loan is capricious and unfounded, then try to help him understand this.

Be calm, diplomatic and most importantly, offer to help in another way such as teaching him how to properly track his expenses so he won’t run out of money regularly.

Both of you could also explore possible income opportunities to augment your earnings.

It takes much character to resist the temptation of giving in to unreasonable monetary requests from friends. Be firm with your decision and believe that a true friend will not hold it against you if you choose to keep your money to yourself.

Things could be different if it’s your family that’s borrowing money. In that case, then you should read this: Giving Financial Support To Your Family and Relatives

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Photo credit: NYTimes

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46 comments

  1. I have problems with friends that borrow money. Part of my problem is with book-keeping. I can’t seem to remember who owes me what. Of course this is a minor problem compared to dealing with disagreements that arise.

  2. Of course, part of the responsibility on your part when you’re lending out money is keeping record. And I agree, dealing with disagreements is more frustrating, this is why you need to have everything written so that both parties are aware of the conditions of the loan.

  3. Bill Cosby did an entire skit on this many moons ago.. Don’t lend it, just give it. Because at some point and time, that friend will find a reason to be mad at you. Therefore, the debt will go unpaid!

  4. Hey! Fitz! I have the article on monthly budget, already. How do i email it to you? It is a hundred percent original article which I willingly share with you audience because i truly believe in taking control of one’s finances.

    I hope you will like it. Please give teach me how to email it to you. Thanks!

  5. Hello Fitz – great post (yet again!) 😀 I simply made it a rule not to lend money to friends. I have seen so many broken friendship due to monetary disputes. It is true that “true friends” will not hold it against you if you say no. However, it is better that they be disappointed now than the time when you have to leave a friendship due to an unpaid debt. Love your writing skills Fitz!

  6. hi hotmama mathe, i am new here, i am interested in your article on monthly budget, am in my journey to financial freedom, please share it to me.

  7. @chuva
    I have friends who borrow and/or lend out money very often. I wrote this article for them because I’ve already seen minor conflicts arise within the group. I hope that this post will somehow help them change their outlook regarding money and friendships. Thanks for the comment and the visit. 😉

    @ms hopeful
    I’ll post that article in here as soon as I can. For the meantime, you can read my previous article regarding the Envelope Method for Budget Planning, it will teach you how to do your monthly budget by using the simple envelope. The post also comes with a free MS Excel worksheet that can help you track your expenses. Enjoy!

  8. pwede ba mag tagalog? hehehe

    i met up with a HS classmate last week, that was first time we’ve seen each other after many many many years ..and she had the guts to borrow money from me…it’s ok lang sana but the thing is we’re not even close during HS days…

    i couldn’t say no….eh pano ba naman she even went all the way to my house just to get the money

    nabawasan tuloy ang pang retirement plan ko…lol

  9. @chuvaness
    oo naman, pwede mag-tagalog… wag lang madalas kasi baka mag-nosebleed ang mga international visitors ko

    anyway, i could totally relate to your story. i once had a classmate from HS who went to our house everyday looking for me, but i was not at home because i was at work. come weekend, he was able to talk to me and he was asking for a financial loan because he (insert sad story here).

    we were never close in school so it was really odd. i just told him that i don’t lend money to friends but i gave him a little money for the expenses he incurred for coming to our house for the past 3 days.

  12. […] we can help our family and relatives. If we’re rich, we’ll not have second thoughts of lending money to friends who need it. Being rich also means having the ability to become more charitable to the less […]

  15. hi fitz, great advice… still reading thru your old posts.

    I’ve had this experience many times and have always found it hard to say no during the first few times it happened. My spouse has it worse, even casual acquaintances would borrow from her.

    Just to share, one way we overcame this was to seriously take stock of our own personal financial management.

    Locking down cash into investments and just leaving enough for our own personal 3-month emergency fund made it easier to turn down borrowers unless they really need it.

  20. i wish i had read this earlier before i had an urge to lend my friend some money. the money i lent him wasn’t an amount i was comfortable letting go of. i just hope that he gives me back the money in a month as promised. 🙂

  21. Very, very well written! Thank you so much. I am so relieved to have read this after not lending money to a friend. I felt so bad, I didn’t want to hurt his feelings at all, but I also wasn’t comfortable lending money especially because I am also just starting out. My advice to other young people: don’t beat yourself up over it. It’s not a matter of thinking of the best excuse so that your friend will understand your saying no. Stick to your decision, and in the end, your friend will be grateful that you valued your friendship more than money.

  22. hi Fitz, been stalking your blog for quite sometime now. I like the topics that you tackled coz i can really relate to it. Some situations even happened to me like this one. A close friend borrowed money from me (its actually my savings) and did not pay. That was 3 yrs. ago and til now its not yet paid. So, that experience taught me a lesson and that’s not to lend money to friends coz if a friend doesn’t pay up it will screw up the friendship. Right now, I focused on becoming financially stable and i really appreciate the tips and knowledge that you impart on your site.

    Thanks. by the way how will i follow your blog?

  23. Hi alyntoi, thanks for sharing your story. If you want to follow my blog, you can just enter your email address in the textbox at the sidebar under the Welcome section and click “Subscribe”. 😀

  24. Hi Fritz, Up until recently, I’ve been able to resist the occasional request for money from a long term friend (questionable to their motive of “Friend”), but I was caught off-guard… After getting considerable positive promises of senerios common to trying to get your money back, I conceeded… Things went very good for the first two installments, but the third, started having signs of one of the senerios discussed, (Can I pay you $$ and the rest later?) I started feeling anxious at this point and calmly reminded them of this discussed senerio and waited for the rest of the payment plus two additional full payments. I’m waiting…waiting…waiting 🙁
    They are having a Birthday tomorrow and I’m thinking of sending them a Birthday card with a “contract forgiveness” for the remaining $400.00, cutting my losses and the friendship… What do you think???

  25. You are writing about a seriously matter. It always a problem when friends want borrow money. It is difficult to remember how much it was, if he/she has paid back. If I refuse to borrow money they will get mad at me. If a borrow friend money they will be mad at me when I need the money back. It is a lose lose situation.

    Your advices are very valuable, I will come back and read this text more times, so I can remember how to do next time my friends ask for money.

  26. The best thing is to now borrow money to people, but to teach them how to manage it. 🙂

  28. i have been earning money since i was small because we were poor. i did odd jobs like collecting and selling junk (broken bottles, aluminum, tin cans) and making drawings and crafts (i am good with my hands). i studied hard and now have my own international design consultancy business. ever since i can remember, someone is always borrowing from me and i was hardly paid back. i have been there, done that. the problem is, i have this really soft spot and i cant stand not helping. a lot of people say i am truly blessed and talented and should share my blessings. but it’s not just talent. most of it is hardwork.no matter how you explain on why you can not lend money to borrowers, they don’t listen and worse, don’t understand. all they care is to get the money they need (in between sobs and begging for mercy). so there goes my soft spot. bo sanchez had a good article about “knowing your limits” and i am trying to do this because i am married now and my husband does not like that friends and relatives just knock on our door and ask for money. one time, my true friend called me the country’s human atm machine. i am still struggling, and learning up to now but with my husband’s support i hope i can be more strong. i have actually “given” a lot of money away, then i discover that friends and relatives duped me and it hurts a lot. i don’t know why people you know and trust for many years do this to you. can they sleep at all?

  29. What do you think about having them sign a written contract? And if that’s ok, what should I write in it?

  30. Hi Rob, it would be better if you have a contract. It does not need to be formal, just a signed and written document that states the person borrowed X.XX amount from you and promises to pay on a specific date.

  32. I have a friend girl who are working in Singapore and she was so overweening, brag, smug, boastful, liar, pretentious, puffy and pompous…she borrow money but she always making promises that she will pay me but unto now she doesn’t pay.

    Your article are very good but I need more to know what shall I do to get the money or I mean a word that can push her to pay me.

    Teach me more. Thank you.

  33. Hi! I’m a newb here, i appreciate this article very much because i used to think that lending money to friends is a way to please them;thus making us closer. I had the same situation with Chuvaness although it was with my perfume business. She tooka lot of orders from me and never paid me back,it was a lesson learned the hard way and because of these i know now that i’m not yet educated enough to establish a business and i’m too kind. Sort of nabudol budol ata ako ng hs classmate ko.

  34. Hi. I’ve been friends with my college classmate. She has a job and her husband, who is in the US, has a job too.

    Two days before my birthday, she sent a message to me on skype asking if she could ride on my credit card for her two children’s school shoes, uniforms, notebooks… I politely declined the request by saying I just bought my medicines and still have to buy my daughter’s other school supplies.

    She said, “Ouch.”

    I was truly very much offended. It felt like I don’t have a right to celebrate my birthday with my daughter and that her needs are more important. I ignored everything first as I wanted to welcome my birthday and live my birth month stress free. June 2015 passed and she did not even remember to greet me. This wasn’t the first time she attempted to borrow money. There were 3 times. The first time I lent money, it was for her husband’s plane ticket to go abroad. I did that in good faith thinking that he would get a job as soon as possible. She was able to pay back the loan BUT before I was fully paid, her kids had new cellphones. I have been checking their lifestyle and after the attempt to try to ride on my credit card, I discovered they have two dogs and dog food on a budget.

    So, the second of week of July, I interviewed her finances and found out she had an emergency fund but she can’t touch it. No life insurance and no retirement savings at all. I told her bluntly all the discomfort she caused me when I:

    1. found out her kids had new cellphones before I was fully paid on 2014
    2. she kept coming back to me trying to ask for capital for business, trying to borrow P25,000 to pay for her tuition fee so she can take her exam (she did not finish college education on time)
    3. and the last was June 2 on buying her children’s uniforms, school shoes, etc.

    After finding all about her finances and discovering she had emergency funds, I really flared up. My last message to her was, “Cut your expenses!” And then I ended the call.

    Good riddance. I would no longer feel uncomfortable in having such kind of friend.

  35. The sad part of lending money to your friend is that they don’t return the money. I’ve learned not to lend money to friends even close friends.

  36. I am a retired foreigner and permanent resident of the Philippines with my Filipina wife who I have been married to for 30 years abroad both working and saving for our retirement. We built a semi mansion in the town we live in and have since endured endless requests to “borrow” money from people we don’t even know. After twelve months and not seeing one centavo being paid back we now question why they need the money, if it’s for medicine, we ask for the doctors prescription, if it’s for food, we give them enough for the next meal, the sad stories while usually accompanied by small children in tow are endless. Because we appear to be wealthy we are thought to be easy game for this traditional pastime. After now living here for 4 years, we know who’s who at the zoo and know who the genuine borrowers are and won’t try to add us to their list of kind people that can be easily scammed.

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