Should You Lend Money to Family and Friends?
If you’ve managed to be the “go to couple” when people need money, the good news, it means you are likely good with your money. Responding to friends and family members who ask to borrow money can be a sticky situation.
It can be difficult to say no when someone asks you for money. Money can ruin many relationships with loved ones. Unfortunately, it can also cause a lot of marital problems. Before a couple decides whether or not to loan money, they should work consider the potential risks.
Loaning Money and Marital Problems- An Example
Anna’s sister came to her to ask for a loan to get her car fixed. Anna felt that they couldn’t possibly say no. After all, her sister had to have a car to transport the children to their various activities and her husband worked hard but money was just tight for them.
Anna’s husband, Steve, wasn’t thrilled about loaning the money. He felt like Anna’s sister should go to the bank and get a loan or make some changes in her life if they weren’t stretching their money far enough. However, he didn’t want to come in between Anna and her sister so he agreed to loan the money.
As one month stretched into two, there was no discussion of repayment. Steve asked Anna often about the money and she would simply say that her sister would repay the money as soon as she could. Steve grew frustrated and resentful toward Anna’s family as time slipped by without repayment. As a result, Anna and Steve’s marriage began to suffer.
When a couple loans money, it can create marital issues. Often, both people don’t agree completely with loaning the money or they have different ideas about how to collect the money.
It Changes the Relationship the Borrower
When you lend money, it changes the relationship with the borrower. Instead of having an equal relationship, you become more like a bank. It is hard to treat one another the same when business is mixed with pleasure. There is often tension, anger and resentment when money isn’t repaid on time.
When you loan someone money, you now have an interest in their financial habits. For example, if your sister says she can’t manage to scrape up any money to give you a payment toward her loan, yet she also talks about going out to dinner with friends, it can be frustrating to hear. This can cause a rift in relationships when people who owe you money aren’t making good financial choices.
You Risk Enabling Someone
There’s also the risk of enabling someone. If you have a friend or family member who is constantly short on money, loaning them more may just enable them to continue. People who can’t make ends meet need to make changes. If they don’t, they won’t ever get out of the cycle. Loaning them money can just prolong the inevitable and it’s unlikely you’ll get your money back any time soon, if at all.
Loaning Money Like a Bank
If you and your spouse decide to loan someone money, the best way to do so is to act like a bank. Create a written agreement with terms of the loan. Most people who loan money don’t set up an official repayment plan. Instead, the unofficial agreement is usually that the borrower will pay back the money as soon as possible. However, these open-ended terms can lead to a lot of confusion and tension.
Write down the terms of the loan. Discuss when you want to be repaid and what the terms of the loan will be. Also, discuss what will happen if the money is late. For example, will you charge interest?
Alternatives to Loaning the Money – Gift
If someone has fallen upon hard times and you are blessed to have the money to help them, consider offering a gift instead of a loan. Tell the borrower you don’t want the money back. This can help preserve the relationship and rid the transaction of any tension.
Developing a Plan with Your Spouse
When it comes to loaning money, the most important thing is that both you and your spouse agree on a plan. It’s essential that both of you are in complete agreement with loaning money before you agree to do so. If one of you isn’t on board, don’t lend the money or it will only risk problems in your relationship. And if you do agree to loan money, establish a plan so you can agree on the terms of repayment.
