What's cash between friends?
September 4, 2012 5:46 PM   Subscribe

Loaning money to friends is a bad idea... right?

A friend of my wife's (and ex,way long ago) who lives in another city called her today to ask if he could borrow some money, it's not a large amount and we can basically spare it but he also mentioned that he is not sure when he will be able to pay it back.

I am pretty fine with giving him the money, he's a good guy stuck in some tough situations and I just see it as helping a friend.

The question is; I would like to gift him the money, and tell him so, my wife thinks his pride will not allow this and we should expect him to pay us back, mostly for his sake.

Is it not easier on all to let him know that this is a gift between friends without strings attached?
posted by Cosine to Human Relations (33 answers total) 1 user marked this as a favorite
tell him it's a gift but if he insists on repaying, ask him to pay it forward?
posted by special-k at 5:50 PM on September 4, 2012 [12 favorites]

I never lend money to friends or relatives. If they insist, I tell them they can pay me back "whenever" and then I never bring it up again. (If my wife's ex called, though, I might not give him anything... but that's just me...)
posted by brownrd at 5:51 PM on September 4, 2012 [2 favorites]

Lending money to friends is a bad idea. Debt is a corrosive force on social relationships, adding a layer of obligation and entitlement to what should be a relationship of mutual trust and obligation. It changes the playing field and gives one party the permanent upper hand.

There are relationships where this is okay, but those relationships aren't friendships or familial. They're commercial, and they should stay that way.

If this guy is too proud to accept a gift, that's his problem, not yours. If you want to say "Look, you can pay us back if you want, but you don't have to," that's one thing. But you need to make it clear that you don't expect to be repaid. Otherwise he'll justifiably feel indebted to you in a way he's not likely to be able to expiate.

Of course, he may still feel indebted even if you just give him the money, but that's his problem, not yours.
posted by valkyryn at 5:51 PM on September 4, 2012

I never loan any money to friends that I am not 1000% ok with writing off entirely.

Today I gave my best pal back the 20 bucks I borrowed from him last week and he was confused for a second--he forgot about it entirely.
posted by mollymayhem at 5:53 PM on September 4, 2012 [9 favorites]

I've done it twice, with the expectation of not getting my money back. I ask them how they plan to pay me back and when, and how this is NOT a continuous problem. I also look at other ways to solve the problem before I'll lend them money. I also give them the option of doing some work for me (house repairs, etc) for pay instead of borrowing money from me. If they're not comfortable talking with me about money, they should not be asking me for financial help. If they have not tried to solve the problem in other ways, they should not be asking for financial help. If they don't know how they will pay me back, they should not be asking for a loan.

I'll ask them to pay me back three times (or more, if they tell me a specific date), but then I drop it. I've had good luck both times.
posted by ethidda at 5:55 PM on September 4, 2012 [1 favorite]

I remember watching Oprah on TV when I was 11 years old. She was saying she never lends money. Mostly because if they don't currently have the money that they need to be borrowing for, what makes you think they will ever have the money to pay you back. So if someone asks to borrow money, she gives it to them with accepting the idea that she will never see it.
So if you want to say you loan it for his sake, just accept that you will never get it back for the friendship sake.
If it's family that's usually what I do, if it's friends I expect something given as collateral.
posted by udon at 5:57 PM on September 4, 2012

to add to my last comment. I have a garage full of collateral that I never really wanted.
posted by udon at 5:59 PM on September 4, 2012

Call it a loan, but consider it a gift. If it ever gets paid back, consider it found money.
posted by Tanizaki at 6:06 PM on September 4, 2012 [5 favorites]

What I've done in similar situations is to allow the money to be framed as a loan, while also telling the recipient explicitly that my policy is not to loan money to friends unless I don't need it back, that any repayment will be gravy, and that I'll only request repayment if someday I'm in financial need while they are prospering. (The last bit helps remind them & me that fortune is fickle, that financial status is not intrinsic to persons, etc.)

This policy has worked out well, in that the friendships have remained intact, with minimal weirdness AFAIK, and my friends have escaped those particular tight corners. Also, sometimes I get unexpected parcels of money, which feels great.
posted by feral_goldfish at 6:06 PM on September 4, 2012 [43 favorites]

Whenever I have loaned money to a friend, I have always done so completely ignoring the fact that they would pay me back. I neither expect it, nor not expect it. That way, there's no resentment. Obviously, this sets a pretty low limit to the amount of money I'm willing to lend anyone.
posted by griphus at 6:08 PM on September 4, 2012

he also mentioned that he is not sure when he will be able to pay it back.
Good -- this opens the door for you to explain that repayment is unnecessary.
posted by feral_goldfish at 6:11 PM on September 4, 2012

If my friends did what ethidda did, I'm... not sure they would be my friends anymore. If I've gotten to the point where I have to ask you for money, circumstances are pretty damn bad, and having my friend second-guess all of my financial decisions is not going to make anything better. Furthermore, if things had gotten so bad that I went to my friend asking for help and they told me that the help I needed was contingent on me doing home repairs, I'd be a little bit put off.

If you want to help your wife's friend, I'd say give him the money. If he does pay you back, great, but I'd never ask or remind him.
posted by Weeping_angel at 6:13 PM on September 4, 2012 [6 favorites]

This sounds like a good scenario for you. You can "loan" him the money which you essentially are considering as a gift so if you're paid back it's just a bonus and he can keep his pride.

I think the situation is only stressful if you're having to play debt collector and that doesn't seem like it will need to occur.

In general though, loading money to anyone is a bad idea. You are not a bank.
posted by zephyr_words at 6:14 PM on September 4, 2012

I knew the adage, "Don't lend a friend more than you are prepared to lose, you'll never see it again," and I really thought I would be ok with that. I really did. I was doing a nice thing to help a friend, they were in a bad time and they said they would pay the $500 back, I said, "No problem, pay me when you can." I was prepared to write off that money. I thought losing money would be the only way it would affect me.

I was so wrong. Especially when I found out that said friend took their significant other on a mini cruise while they still owed me the money. Yeah, it went up my ass big time. I know I said, "no problem, pay when you can," but I didn't think I had to say, "before you go on a vacation." I really felt disrespected and taken advantage of that my friend had no problem with spending money on a vacation rather than paying me back - especially after I had put myself out there and helped them out of a bad time. Needless to say, in addition to the money, I lost a friend. But it's cool, because they really weren't a friend, were they?

Try to cover all your bases because lending money could cost you more than the money.
posted by NoraCharles at 6:29 PM on September 4, 2012 [18 favorites]

In my family, if we can afford to give it, we do. If not, we don't. No loans, ever.
posted by Marie Mon Dieu at 6:32 PM on September 4, 2012 [2 favorites]

I like feral_goldfish's suggestion best because it's very explicit and clear. I think calling it a loan but thinking in your head that it's fine they don't pay back could leave either giver or recipient with something hanging over their head to think about, potentially forever (hmm, I should really try to pay joe back). And I think saying "it's ok if you don't pay back" or just saying, "no I don't lend, here's a gift" puts the recipient in a potentially more awkward and dependent-feeling position.
posted by spbmp at 7:06 PM on September 4, 2012

Tell him to pay it forward to charity or another friend some day when he can. Let's him feel like he will come out 'even' if that's important to him without putting you in a debt collection position.
posted by jacalata at 7:08 PM on September 4, 2012

If it's a loan-loan (as in I wanted to get repaid), you get one shot with me for a relatively small sum I can afford to lose, and if the money doesn't turn up, you lose loan-loan privileges, because how can I expect you to pay a larger sum back when you didn't repay a smaller sum?

If it's a loan in the traditional between-friends sense (I'm giving it to you with no expectation of being repaid), then I consider it a gift and would never mention repayment, though I might do the Godfather voice one day when I need a favor.
posted by Ghostride The Whip at 7:17 PM on September 4, 2012

I loaned some money to a friend once who didn't want it as a gift, and I told her "okay, if you haven't paid it back by $DATE, I'm going to consider it a gift - no worries."

That said, I like feral_goldfish's take on things.
posted by rmd1023 at 7:21 PM on September 4, 2012 [1 favorite]

Once, I lent what was to us both a pretty substantial sum of money (about 25% of my not very substantial net worth) to a friend once, but I made up my mind beforehand that if I never saw a dime of it back that I would be ok with that, though I did not mention this to the friend. He paid it back, as it happens, though I was prepared for the eventuality that he wouldn't. I charged interest (the prime rate at the time, about 6% annually as I recall, and had an agreed upon payment plan, with no penalty for early repayment.) Another time I lent a much smaller amount to a friend in a jam, also made up my mind I would be ok with never seeing a dime of it back, this time no interest, no payment plan, no anything, just "pay it back when you can". Both times it worked out (repaid in full), but in both cases I was mentally prepared not to ever see a dime back and be ok with that.
posted by smcameron at 7:36 PM on September 4, 2012

It might make more sense to you and me to understand it as a gift, but given:
A. He's a good guy in a tight spot and you want to help him out
B. His pride might not let him accept a gift
C. A + B could result in him not benefiting from your gift
D. You don't want C to happen

In this situation it might make more sense to frame it as a loan with a very generous repayment agreement. Perhaps with some reasonable future benchmark that indicates he's able to start repayment (like, he's able to do ___ leisure activity, or something).
posted by bleep at 7:53 PM on September 4, 2012

I borrowed a substantial amount of money ($1500) from a friend once, for an emergency vet bill. She never mentionned it again and it took us over a year to start paying it back. We paid it back over the course of a couple of years. There was never any weirdness.

What made it work was this: 1) when she said it was a loan but she didn't care how long it took us to repay it, she meant it; 2) she never mentionned it again. We paid her when we could, and she accepted the money back. She never called us on how we spent our money in the meanwhile, trusting that we were doing our best. It could not have gone better.
posted by arcticwoman at 7:58 PM on September 4, 2012 [2 favorites]

Is it not easier on all to let him know that this is a gift between friends without strings attached?

In my opinion, absolutely. Of course, you can always consider it a face-saving fiction to call it a loan; it almost sounds like he's expecting that. If you don't see much of this guy, there may not be a big downside either way. But a loan that's not getting paid back can become a weird unresolved thing between you. Are you prepared to hear, "Hey, about that money I owe you" over and over again? Or, conversely, to sense that the person is avoiding you or acting embarrassed while not bringing up the loan? Because that may happen even if you don't care about getting the money back.
posted by BibiRose at 7:59 PM on September 4, 2012 [1 favorite]

My line for loans has always been, "whatever you can, whenever you can." Mostly because if I can't afford to say goodbye to the money, I can't afford to loan it. Graciously accepting whatever rolls back in takes practice, but it usually works out better that way. People get into weird mental roadblocks about ,"it has to be all or nothing," and that's where friendships dissolve.
posted by halfbuckaroo at 8:37 PM on September 4, 2012 [1 favorite]

My general policy is to give (gift) them half as much as they ask for as a loan. I find that you lose half as much and have twice as much chance of getting it back. "I can't lend you $500, but I can give you $250." "But I don't want a gift, I want to pay you back." "Well then, one day, when you feel like giving me a gift, do so."

However, this is generally applied to situations where I don't really want to give a loan but feel some sort of obligation to participate to some extent. In your case, you seem to want to and are able to help to the extent he asked. In that case, I would tell him you have a policy against lending money to friends, but would really like to help by giving him the $XXX and if he wants to surprise you one day with a gift of his own, that would be fine.
posted by JohnnyGunn at 9:09 PM on September 4, 2012

If it is someone I would give the money to but they would be uncomfortable with an outright gift, I give them the money and say, someone did this for me when I was in a tight spot and told me to pay it forward, so I am passing this on to you. One day when someone needs some help and you are able, then you pay it forward. I don't lend money or books.
posted by Anitanola at 10:08 PM on September 4, 2012 [2 favorites]

On the idea that the friend should accept this as a gift, or that you should see it this way-- it's fine for you to accept that the money might not be returned as a kind of security (both mental and economic) but I don't like the idea of telling the friend that you 'see it as a gift' or that you really don't want the money back. If I were the recipient this would irritate me-- my desire to borrow some money off you (not a position that I would like to be in) has now become an occasion for you to demonstrate your magnanimous character... can't it just be that you are helping with, with what I asked for, in the manner that I requested? Don't impose your generosity on them more than they have asked for-- it seems condescending to me, and perfectly reasonable that the friend would want to pay you back.

Of course, it is a lovely gesture to offer this option. But don't insist that they take it up, or even push it. This seems like a fairly self-centred approach to an ostensibly or otherwise generous act.
posted by jojobobo at 12:42 AM on September 5, 2012

I find loans corrosive. Gifts, not so much, but they seldom come back. So what? I have enough and give it away when I can. How do I know if someone needs it unless they ask?

I will decline unreasonable requests and repeated requests, without too much angst. (This usually requires serial disappointments to master. Best to get a start on the process young while it's cheap.)

I will often offer to help with the problem, as opposed to just paying for it. Useful as a probe for determining the truth of the matter in questionable situations.

Peeps asking for small amounts of money raise the question of why? Peeps asking for large amounts raise the issue of due diligence. Folks in the middle usually have alternatives. For instance, if he has an IRA, offer to pay the penalty and taxes on a withdrawal as a loan. Then, he's paying for most of it and you are still helping. Offer to pay the debt holder, perhaps. Loaning discretionary money seems unwise.

Where does your friend fall? Can you give him something you have that he can sell and that you don't need? Can you employ him on a worthwhile project? If you can do that, he's free from paying you back AND he's in charge of when he gets paid. (Wise to pay on delivery.)

What is the problem he's trying to solve? Is a loan the best way? What makes it your problem? Do you accept that problem?
posted by FauxScot at 1:14 AM on September 5, 2012

Even if the non-payment of loan isn't a stress to you, it'll be a stress to your friend.

Either gift the money, or don't do it at all.
posted by grudgebgon at 4:13 AM on September 5, 2012

There may be a peer-to-peer lending company that could facilitate loan payback. That was the idea of Virgin Money US, but they are out of business.
posted by larrybob at 7:42 AM on September 5, 2012

FWIW, in cases like this, I always do what special-k suggested: give the money as a gift then ask the friend/relative to pay it forward (or donate to a charity). That strategy has worked out so far.
posted by skye.dancer at 11:51 AM on September 5, 2012

I never lend money to friends. I did it twice, and each time the person I lent it to resented that they owed me money, even though I never mentioned it.
posted by tallmiddleagedgeek at 12:13 PM on September 5, 2012

I hate the idea of pretending that the money is a loan, but not expecting repayment. Is this a common unwritten expectation about loans between friends? Because if it is, it could help to explain my ex-friend's outrage at the suggestion that she pay me back the money she owes.
posted by Wordwoman at 1:25 PM on September 9, 2012

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