Friendship is all about being there for each other but it is still risky to offer financial help to your friends. What happens if they can’t pay you back or refuse to pay back at all? What if they become dependent on you and you are suddenly funding their lifestyle too? Equally, what if they are in a dire situation and you’re their only hope?
Before you make any decision, you should ask these three questions.
Could Your Friend Get Help Elsewhere?
There are lots of ways to receive financial help so before you offer your friend your own cash, it is definitely worth exploring the options. There are companies that offer more specific financial help such as Bail Bonds but there are also companies that offer short term loans for more general purposes.
Getting help from a company will obviously come with charges but looking at the options with your friend should give you an idea of the scale of their problems too. Exploring the different options together is also a good way to offer your support. Asking a friend for help with money doesn’t always mean they need you to give it to them, just support while they sort themselves out.
What are the Terms of Your Deal?
If you decide to lend your friend some money, you must agree on some terms and conditions beforehand to avoid any disagreements later on. In fact, you should actually draw up some paperwork that you both sign before any money changes hands. This might sound extreme but you need to protect yourself and they need to know how serious it is for you to lend to them. Setting out a timeline for repayments, agreeing on late fees and interest and be firm about what you need them to do to make this work.
Another way to lend money is to do a swap, a bit like a pawn shop. One of the first things you should consider when getting out of a sticky financial situation is selling things you don’t need. One option could be that your friend sells you something in exchange for the money they need, then when they are ready to pay you back, you simply sell it back to them again.
How Might This Affect Your Friendship?
There are lots of reasons that lending money to a friend could be a really bad decision. If they fail to pay you back or you end up in financial trouble as a result of lending beyond your means, it could quickly result in a big row and the end of your relationship altogether. You should never lend if you feel you are being blackmailed or manipulated.
On the other hand, if you trust your friend and you take the steps you need to protect yourself and your money, lending could strengthen your relationship and really help them out. Ultimately, the decision whether to lend or not must be yours and you need to look at your unique situation.
