5 Reasons Why You Shouldn't Lend Money To Your Friends

When your friend wants to borrow some money, how do you handle the situation and where do you draw the line? Read on to know the reasons why lending money to your friend is a bad idea.

You know how the saying goes, “give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime.” By lending your friend money, in a way, you will be giving him or her a free pass, and doing so may not actually be in their best interest.

You may be condoning a bad habit which you didn’t know about such as gambling, or even something less serious but which most people are guilty of, living beyond their means. You may be doing more for your friend by being firm and saying no. Your friend will then be forced to find a permanent solution instead of being dependent by relying on you for money support.

My mum once told me, “only lend the amount of money you are prepared to not get back”. Even though most of us have been brought up with the notion that, “when you borrow money, you pay it back”, but life is not always that simple and straight-forward. When it comes to lending money to people you know, chances are because of the relationship, people take repaying it lightly.

Money has a way of revealing strange sides of people. You might find yourself parting with your money, but quite possibly also your friendship. 

Whether you like it or not, the dynamics of the friendship may change. This is because lending money to your friend may cause awkwardness. The borrower (your friend) is now indebted to you, while you as the lender, may fear offending your friend so you avoid reminding or asking them about repayment. 

Reminding or having to ask your friend to pay you back will make things uncomfortable and awkward.

None of us has the power to see what the future holds. As such, if lending money to your friend requires you to take money out of your emergency fund or savings, don’t do it.

Your savings and emergency savings are there to ensure financial stability for you and your dependants. What if you suddenly lose your job and you then need to rely on your savings? Under such circumstances, every bit of money will count. 

It’s best you keep your money for your own rainy days and instead provide friendly suggestions to your friend on how to better manage their finances.

Your friend may have used the foot-in-the-door technique without you, or even them, realising it. 

The foot-in-the-door is a psychological compliance tactic. It involves getting a person to first agree to a small request because later the person will be more likely to comply with a larger request. Your friend may first lay the groundwork by asking to borrow a relatively small sum, such as RM100.

But after you have agreed to lend them the smaller sum, you will be more likely to agree when your friend asks to borrow a larger sum of money the next time. 

When your friend has successfully borrowed money from you, chances are it may not stop. Your friend now sees you as a “reliable” friend to go to when they’re financially strapped.