It’s one of the most dreaded moments in a long term friendship. Your friend calls you up, tells you her sad tale of financial woe, and then asks “Is there any way I could borrow X dollars until Y date?”
No one likes being put on the spot like this — you feel like saying no will damage your relationship, but you know that money has a terrible habit of damaging relationships. So how do you handle such a request and still feel good about yourself and your friendship (and your own finances) afterwards?
If you need to say no…
If you cannot financially afford to help out your friend, then you have to say no for your own protection. Lifeguards are taught that the only thing more tragic than one person drowning is two people drowning. It’s the same idea with finances — the only thing worse than your friend having financial trouble is if her problems become your problems.
Remember first and foremost that you don’t have to explain why you are saying no. Your friend is asking you the favor, and even Miss Manners would not require you to say any more than “I’m sorry, but I can’t.”
However, depending on the strength of your friendship or the hardship your friend is facing, you might find yourself wishing you could help even if you don’t have the cash.
Why not ask your friend if there are other ways you could help? If the problems are job or career related, offer to network for them or go over their resume. If the issue is credit card debt, offer to connect your friend with some credit counseling. If your friend simply can’t make ends meet this month, offer to cook some meals or drop off some groceries for her.
The bottom line is that there are many ways to help your friend. You can make sure your friend knows you care without having to jeopardize your own finances.
If you can say yes…
You must tread carefully, even if you do have enough money to cover the loan. One way of making sure that the loan cannot come between you and your friend is to make it a gift, instead.
In the case of a gift, there is no sense of resentment if your friend has trouble repaying you. You can let your friend know that she can give you a gift in return when she gets back on her feet — or she can pay it forward to help someone else.
If you decide to actually go through with a loan rather than a gift, be completely businesslike about it. Tell your friend you will need to have a contract between you that spells out the total amount that you will lend (so that there will be no repeat visits to the Bank of Friendship), the repayment plan, the amount of interest you will expect, if any, and what will happen if your friend defaults on the loan.
When you make it clear that these are the conditions you require for a loan, your friend may decide that he would prefer to go elsewhere for financial help. It may seem harsh to tell a friend that these conditions are necessary for a loan, but neglecting a written contract will most likely doom the friendship anyway.
Uncomfortable moments in a friendship are part of having relationships with others. Only you know what you and your friendship can handle. Don’t feel like you have to do more than that simply because no is a difficult word to say. It’s better to be up front and honest with your response.
The worst thing you can do is to give your friend hope by saying you will think about it and then ignore the need all together. Remember that your friend probably had to gather a bit of courage just to ask you for money. After all, not many people wants to be look down upon by asking for a help financially.
Do what you can and be the good friend that you are.
Originally posted at https://moneyning.com/money-management/what-to-do-if-a-friend-asks-for-a-loan/