Loaning Money To Friends

If you want to wreck a friendship either borrow money from or loan money to a friend. I learned this the hard way on two separate occasions. A friend asks to borrow money from you because a bank won't loan them the money. Banks are in business to loan money, at interest, so they can pay dividends to their stockholders, build nice buildings and pay their employees hefty salaries. If a bank won't loan someone money it's because they don't believe the person is a good credit risk or stated another way, "they don't think they will get their money back!" DUH!

So when a friend comes to you for money you have two options:

1) Give them the money without expecting them to repay you, because they probably won't pay you back.

2) Tell them no and the reason is that you don't want to ruin your friendship by loaning them money.

Now repeat after me, "I am not a bank, and I don't loan money to friends."

Now if you think I'm joking about this read this next part. I was "Steve's" best man when he got married. A few months later he called and asked to borrow $700 for three weeks until a real estate deal closed. I loaned him the money and three weeks later the real estate deal didn't close. I would call him up and I continually got a sad story about why he couldn't pay.

I did a little digging and over a dinner conversation with another friend I learned that "Steve" had borrowed money from her and a number of other people. Well this only served to make me more determined to get the money repaid to me and others!

I began calling him on a regular schedule and nothing was happening. I discovered his wife didn't know about his creative borrowing habits and so I brought her into the "loop" and that was the catalyst to get things moving! I finally got repaid but it took two years and ruined our friendship. I have not heard from him once since then and that was three years ago.

I haven't had any other friends request to borrow money but I now have my reply, "Sorry, I don't loan money to friends."

PS - NEVER co-sign a loan for anyone, under any circumstances, ever!