The story I encountered online begins with a seemingly harmless situation: A friend reached out to borrow money from me via social media, and I was about to transfer the funds when suddenly, he added, "I'll pay you back tomorrow." In that moment, I knew something was off because my friend never specified repayment terms when asking to borrow money. It was then that I realized the person might be trying to scam me.
While the
situation is somewhat humorous in hindsight, it highlights a very real issue we
all face: borrowing money is easy, but repaying it is often another story.
Generally, when someone asks to borrow money, it's from a friend or family
member, and if handled incorrectly, it could either damage the relationship or
result in financial loss.
Navigating
these types of requests wisely is a significant challenge, one that tests both
emotional intelligence (how we manage our feelings) and intellectual
intelligence (how we assess situations). So, how should we deal with borrowing
requests? What should we ask before lending money? To help make these
decisions, I’ll share three important questions that you should ask yourself or
the person requesting money next time you face a similar situation. Once you’ve
considered these questions, you will be clearer on whether or not to lend the
money.
Understanding
the Right Approach to Lending Money
As the old
saying goes: "Don't rescue the lazy, but help the needy." Everyone
faces tough times at some point, and it’s understandable to help someone in
urgent need. However, it’s essential to be cautious with our finances. Our
money is not meant to be handed out recklessly, as it doesn’t just grow on
trees.
When someone
asks to borrow money, start by inquiring about the purpose for the loan. Why do they need the money?
This helps you assess whether the reason seems legitimate. It's also important
to ask whether the person can actually repay you. Do they have a plan for repayment, and
are they in a position to do so? If the reason for borrowing is
clear and reasonable, and the person seems capable of repaying you, you can
feel more comfortable lending money.
The
Importance of a Written Agreement
Even if you
decide to lend the money, it’s wise to formalize the loan. Make sure to write an agreement
that includes the loan terms, repayment deadlines, and any interest if
applicable. This step is crucial, no matter how close you are to the person
asking. Just because someone is a friend or family member doesn’t mean you
should skip this process. A
formal agreement protects both parties and makes it clear that
this is a serious financial transaction, not just a casual exchange.
Personal
Story and Lessons Learned
A reader shared
a personal experience where he was invited to dinner by an old friend he hadn’t
seen in a long time. The evening seemed pleasant until the friend began to cry,
revealing his struggles: he had been laid off from his job, his business
failed, and he was now facing a divorce. After detailing all his troubles, the
friend asked to borrow a significant sum of money, promising to repay it as
soon as he could.
Initially,
the borrower seemed genuine, and the lender felt sympathy. Although the lender
intended to ask about the purpose of the loan and repayment terms, he
ultimately let it slide for the sake of preserving their friendship. Later, the
lender learned that the friend had developed a gambling addiction, which led to
the family’s breakdown. The borrowed money, unfortunately, went into the
pockets of the friend’s gambling habit. This story is a painful reminder of how
easy it is to fall into the trap of lending money out of sympathy without
proper checks and safeguards.
This
incident underscores an important statistic: Only 24.2% of borrowers repay their loans fully and on
time. This statistic highlights the importance of making sure
that, if you do decide to lend, you establish clear terms and expectations
upfront.
The
Importance of Asking the Right Questions
When someone
asks to borrow money, it’s natural to feel hesitant or uncomfortable about
questioning them, especially if they are close to you. But, as the saying goes,
"A true friend
respects the process, while someone trying to take advantage will resist
it." This means that while asking for reasons and setting
terms might seem awkward at first, it’s vital to ensure that both parties are
on the same page. Asking the right questions isn’t just about protecting
yourself—it also protects the relationship from future harm. In fact, real friends will appreciate you
asking these questions as it shows you care about clarity and
fairness.
If the
borrower is truly trustworthy, they will understand your desire to ensure
everything is done properly. However, if the person gets upset or becomes
evasive, that should raise a red flag. It's an indication that they may not
have the best intentions, or they might not be as financially responsible as
they claim.
Character
and Reputation Matter
It’s also
essential to consider the borrower’s character before lending money. Has this person been reliable in the
past? If someone has a reputation for being dishonest,
unreliable, or frequently breaking promises, it’s best to err on the side of caution.
Even if they give a plausible reason for needing the money, their past behavior
should inform your decision. Trust your instincts—don’t ignore signs of potential
dishonesty or irresponsibility. Lending money to someone with a
poor reputation is almost always a risk.
One common
scenario is when you lend a small amount to a friend, like the example from the
TV show, where a character lent $ 30 to a classmate for a train ticket. Later,
it was revealed that the same classmate had spent the money on clothes and had
no intention of repaying the loan. This situation, which initially seemed
harmless, turned into a lesson about setting clear boundaries in financial
matters. It’s crucial to
remember that kindness should not come at the expense of your own financial
security.
Evaluating
the Risk and Protecting Your Family’s Finances
Another key
factor to consider is your
family’s financial stability. If lending money to someone could
jeopardize your own family’s well-being, then it’s time to reassess the
situation. Would the money you lend cause hardship for your family? Can you afford to lose it without
significantly affecting your household’s living standards? If
the answer is no, then it might be best to politely decline, regardless of the
borrower’s needs or relationship with you.
For example,
a man in the story shared how, in his younger years, he was very generous with
his money, often lending large sums to friends and acquaintances. However,
after he started a family, he learned to prioritize his household’s financial
health. He stopped lending beyond what his family could afford to lose and
began consulting his wife before agreeing to any significant loans. This
approach allowed him to maintain
harmony within his family while still managing social
obligations. Over time, the number of friends asking for loans decreased, and
the family’s financial stability improved.
Taking
Responsibility and Protecting Your Peace of Mind
As we grow
older, it’s natural to develop a greater sense of responsibility,
particularly toward our families. Your
family’s security should come before any social obligation.
While it’s tempting to help a friend in need, it’s essential to weigh the long-term effects
of lending money. Will the loan harm your family’s financial stability? If so,
it might not be worth it.
Furthermore,
be mindful of people who
may try to exploit your generosity. Some may act as though
they’re in dire need, but once they’ve received the money, they may not take
repayment seriously. It's always crucial to set boundaries and ensure that any loan is reasonable and
can be repaid without damaging your own finances or peace of
mind.
Final
Thoughts
As the
Jewish proverb says, “Don’t
lend money to friends unless you’re willing to lose both the money and the
friend.” Sometimes, asking for a loan can signal the beginning
of the end of a relationship. That being said, life is unpredictable, and you
never know when you might face tough times yourself. If you choose to lend money, do so
with care and diligence—always understand why the loan is
needed, assess the borrower’s character, and make sure that the terms are
clearly understood by both parties.
If you’re
unable to help, don’t feel guilty. It’s
better to protect your finances and avoid unnecessary complications
than to lend money and end up with both financial and relational problems. True generosity comes with wisdom and
responsibility, and knowing when to say no is just as important
as knowing when to help.
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