Why you should never loan friends money
You may have heard the warning to never loan money to friends but deciding on whether or not to loan friends money can be more difficult than you may think. Deciding now that it is not good business sense to loan money to friends or family members is easy enough but when you are approached by someone you care for who asks for your help it is a lot more difficult to turn them away. Hopefully in reading these dangers of lending money to friends, you will not find it too challenging to politely decline a loan request when the time comes. Remember, you should never lend money for it will strain your relationship and someone will end up hurt.
Never mix business with pleasure
You have heard this saying time and time again because it is sound advice. Whether it is working with a friends loaning money to a friend or whatever type of business you may be tempted to go in on with a friend, it is never a good idea because the turn-out is more than likely going to be ugly. Business dealings, however honest they may be, are not meant to involve personal feelings of caring and love for another person. Such emotions are reserved for a friendship. It is important to have both business associates and close personal friends, but it is equally important to clearly designate a line between the two parties.
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Don't let your friend affect your credit score
You may want to help a friend but consider that you may get even more hurt for a long time if this friend doesn't pay you back and your credit history is damaged. You should not be putting your financial security in the hands of someone else, no matter how much you like them. When an individual has no ownership of liability in a loan situation they have no reason to be motivated to make a timely re-payment. Save yourself the time of rebuilding your credit worthiness (which, by the way, could take years to do) not to mention the pain of going through small claims court if the situation gets to that point.
Losing your 'friend' is inevitable in some situations
Sadly, there are many people who make no distinction between a loan and a gift. Others assume that only those who are financially set and have money to spare lend to others. There are many situations when friends refuse to pay and eventually the re-payment of the loan becomes more important than the friendship. Unfortunately, with some people there is no amicable solution. You may eventually get your money but lose a "friend". This is yet another illustration of how much easier it would have been to tell your friend "no" in the first place.
You could just be enabling them
Some people can make quite a life for themselves by living off of the generosity of others. There are thousands of people who live quite comfortably but have no technical training or working skills. So maybe it is in the best interest of your friends in general to give up on loaning each other money. Instead helping them get money other ways is a better strategy. Maybe they qualify for help from a bank or credit union and have not yet though to explore those options. Suggesting alternatives like cash advances can get them the money that they need with the consequences that encourage prompt re-payment. Borrowing from institutions may mean having to pay interest but in the long run it is better for each of you individually and as friends.
