On Debt and Friendship

Updated: February 18, 2021

Someone, I know recently accumulated more than P40,000 in debt. That total is divided by P20,000 as credit card debt and the remaining half as a personal loan from a friend.

His younger brother had a medical emergency and, being the sole breadwinner of the family, he had to shoulder all the expenses. Thus, the need to borrow money.

Even though he had an emergency fund, it was not enough to cover all the hospitalization expenses and the cost of the medicines.

I was able to talk to him a few days ago, and the conversation was a fascinating one.

Specifically, it made me realize that being financially smart is not necessarily always, objectively following the numbers.

What do I exactly mean? Well, just read this part of our conversation that night, which went something like this:

“It’s a good thing that my friend, John, was able to loan you out the money you needed,” I said.

“Yeah, he’s a lifesaver,” he said. “The money came from his own emergency fund, and he even said that I could just pay whenever I can without interest.”

“That’s great to hear,” I answered.

“I’ve been over my finances lately and I think I’ll be able to manage and save around P5,000 each month,” he stated matter-of-factly. “Given the monthly minimum payment of most likely around P1,500 for my credit card, I’m expecting to be able to pay him fully within 6 months.”

“So you’re planning to pay him first instead of your credit card?” I asked. “But you’ll accumulate interest fees.”

“I know,” he answered. “But I’m not really comfortable with owing someone money. I know my loan to him is interest-free and all, but I think the friendship is more important than the extra money I’d have to pay to the credit card company.”

At this time, I was listening in silence. I know he had something more to say and was just gathering his thoughts.

“I know it’s not really what you can say financially smart to do that,” he continued. “But I believe that paying our friend first is the smarter option to do, in the overall view of things.”

If you were in his situation, would you have done the same thing? After some thought, I think I would, too.

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  1. I think I’ll talk to the friend I owed money first. I’ll lay all my cards and give him my financial situation. If he says he needs the money too, then I’ll pay him first. If not, I’ll first settle the credit card loan, then him. The key to borrowing, especially from a friend, is transparency. If you think you can’t pay in time, just tell him right out. That way, he’s not left wondering whether you forgot or choose to forget the loan.

  2. Hi Fitz, I’ve been reading your site, I learn a lot and it is so very inspiring. But I have a question I hope you can answer and give ideas what to do?
    My question is, WHAT WOULD YOU DO IF YOU DON’T HAVE MONEY TO SAVE? because you don’t have an income? I’ve been through a lot of up’s and down but today is really DOWN.. . Hope you can help. Thank you! Cecile Yap

  3. Fitz,

    Based on your post I can say that you’re a good friend. These days, even friends will hesitate to lend his friends money. At any rate, I’ve learned something good today. 🙂

  4. Thanks everyone for the comments. 😀

    Yes, when it comes to money and friends… transparency and honesty is a necessity.

    Saving money starts with the right mindset. Try thinking positive first. Then, examine your lifestyle. Cut back on unnecessary expenses. Last, and most importantly, find an income source. Read about the income opportunities I’ve written here, maybe some of them could give you an idea. Good luck!

    Your comment made me laugh. 🙂 Well, there’s nothing wrong with having this mentality. As long as you have a good understanding of your financial situation, you’re fine. It’s being ignorant with our finances which makes us poor. In my friend’s case, he knew that he’d be paying interests because of his decision.

    That’s a very, very good point!

  5. Hi. If I was in the same situation, I would do the same thing. I have loaned a couple of friends some money about 2 years ago when I was still in college. By the way, I was living alone on what my parents are sending me monthly since I originally live in Palawan. So that means that what I loaned them was my allowance. There were instances when I couldn’t pay my bills since they haven’t returned what they owe me. I don’t know if I should ask them to pay me or should I just forget that I lent them money. Up until now, they still haven’t paid me yet. T_T

  6. I’m in the same situation and I did the same thing. You can easily find money but a friend’s trust is hard to recover once you broke it.

  7. in 2010 i loaned my brother 24,000.00 dollars to date he has paid
    back 6,000.00 dollars. He got a little settlement from some work injury but only sent me 3000.00 dollars he bought another tractor for the business i helped him start, but didn’t pay me off totally. he still owes 18,000.00 dollars and i am on ssd
    once a month he ignores my pleas for help last payment was in feb 2012. i am thinking of going to court. he has his own business. any suggestions.

  8. I would pay my credit card first, but will set aside a small amount of cash (say p500) so I can pay him at least once a month. This way, my friend wouldn’t think I was taking advantage of the situation and I still have the intention of paying him back. Any extra money I would get from my job (bonus/incentive) will be allocated right away in paying him. I’m also not comfortable with owing someone money, but I still have to manage my finances by at least not incurring huge interests fees from the bank.

  9. i will certainly value the act of kindness my friend did if i were in the same situation. But my experienced naman po is inutangan ako and it is almost 2 years na yung utang and i get to see his wife’s posts on FB like bumili sila ng lote and a house and lot with the caption “soon to rise”, pati ultimo pagpapa carwash nila pinopost and i was like “whaattt the heck” but i kept quiet and just waited sad to say baun sila sa utang lalo ngayon. Yung asawa( seafarer) nabakante for almost 6 months na and yung wife suddenly nagkasakit.
    kaya until now im still waitibg for them to pay me back

  10. The gentleman choosing to pay his friend first while paying interest on credit card debt shows me two important thighs. 1. He demonstrates the mark of a true friend who will make every effort to pay back the favor of a personal loan. 2. He shows his friend how much he appreciated the loan during an emergency. Now, if the person who gave the loan is wealthy, they could offer again or even insist that the borrower pay off the credit card debt first. That would be an additional way to help your mutual friend who borrowed to recover more quickly. The beauty of it is, all these choices are completely voluntary.

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