Lending Money to Friends
Before borrowing money from a friend, decide which you need most.
Money and friendship often do not mix very well, like drinking and driving. Money can part the best of friends, and can even sour sibling relationships in some instances. That is one of the first lessons you learn if you are a fan of Judge Judy. The borrower feels the lender should be more understanding or even write off the debt entirely especially when the borrower feels the lender is relatively much better off financially than the borrower. The lender feels used and being taken for granted.
Owing a friend can be awkward, especially when the debt is past due. You start to feel uncomfortable and start offering excuses even when none is demanded. Soon you begin to avoid each other.
Abuse of friendship
Borrowing money from a friend is an abuse of friendship. There is inherent emotional blackmail in the demand – if you love me, you will help, which means if you don’t, then you don’t care. That is subtle manipulation, trying to make the other party feel guilty. Some friends borrow with no intent to pay back. They feel the money is one of their fringe benefits from the friendship.
If we cut our coat according to our cloth, there will be hardly the need to put pressure on our friends to lend us money. There are genuine emergencies whereby a good friend will gladly give without an expectation of getting repaid.
It is the job of banks to lend money
Banks are in the business of lending money to the public. They have the funds and the personnel with the experience to evaluate risks. Banks do not care about your feelings. If you are creditworthy, they will give you credit. If you go to them with a hare-brained idea, they will politely decline no matter how you feel.
It is unfair to ask a friend to risk his savings on your business venture. He cannot analyze the risks even if his life depended on it. The best place to get a loan for a business startup is to borrow from your savings or from a bank and not from a friend (unless he is a willing investor). Such money often does not come back. Your friend is often not bold enough to say “No, this plan is rubbish, I am not ready to risk my money on this”. Rather, he will swallow his apprehension and give you his hard-earned money (hoping and praying that you know what you are doing), so as to avoid being seen as a dream killer or not wishing his friend well.
Lack of forward planning
Some people simply do not plan ahead. They operate on a pay as you go basis. Some look for money to borrow to pay maternity hospital bills, you begin to wonder if the baby dropped from the sky. Babies give 9 months notice, enough time to plan ahead and get everything ready. You would expect anyone who is not ready to shoulder the responsibility of a new baby to locate the nearest family planning clinic.
Some borrow to pay for expensive private schools, hoping and praying as they go along. When you borrow to pay the first term school fees, what about the second and third term? Is it sustainable? Is there any end in sight? You simply drive away the few gullible friends you have through bad debts.
Protection from predatory borrowing
To protect themselves from predatory borrowing by friends, folks have adopted some methods. I call the first method the inoculation method. You lend an amount to your friend knowing fully well he will default. With that bad debt as a barrier, the debtor friend is not bold enough to come to ask for another loan, knowing he has not paid back the last one. That first loan acts as an inoculation to give immunity to the lender – to protect him from further lending requests, and peace returns to the planet. The debtor friend is forced to go look somewhere else. Mission accomplished. This method is not foolproof. Some friends still come back for more loans nonetheless.
The second method is the gift method. A friend comes to you to ask for an N200K loan, you let her know you don’t have that type of money lying idle, so you chip in N20K as a gift. If she comes back a second time and ends up with another gift, she will get the message. She will either not come back again, or knows full well all she can get is another gift, which she may very well come back for. When the gift reduces in amount each time she returns, that becomes a disincentive to keep asking.
The third method is a flat out no, sometimes backed with a gift. Few have the courage to put their foot down this way, as they may not want to hurt the borrower’s feelings.
Giving with wisdom
This is not to say you cannot help a friend in need. We are to help others to the best of our ability. However, it is unwise to help others at the expense of our financial stability, especially if it is not a medical emergency. At aircraft preflight safety briefings, you are advised to put on your oxygen mask first in the event of a sudden drop in cabin pressure before you help others. If you are panting for breath yourself, you put both lives in danger. If you are not an expert swimmer, attempting to help a drowning man may result in two fatalities. The best thing to do is to call for help.
When you keep giving handouts to a friend or keep funding half baked ideas, you are weakening your friend, not strengthening him. By feeding him fish, you are weakening his drive to learn how to fish. You are helping and abetting financial illiteracy. If you keep helping long enough, both of you will go down, then he will go look for a new helper to pull down also.
We need sound judgement, common sense and a dose of financial literacy to be able to handle money especially when it comes to helping friends and family. Part of our monthly budget should include giving – tithes, charity, friends and family in need etc. Taking care of our aged parents is a responsibility which is not optional. However, whenever a friend wants to turn you to a bank or ATM machine, you need to decide which you need most, as money and friendship do not mix very well.