Should You Loan Money to Friends or Family?

by Jason on August 24, 2009

The Dreaded Phone Call

It’s late on a Friday night and you’re sitting on the couch enjoying a movie with your loved one when your cell phone rings.  You hit pause, scramble to get to the phone and pick it up without even checking the caller ID.

“Hey Joe, it’s your cousin Larry!”

The dreaded words you didn’t want to hear.  It’s not that you don’t like your cousin, but he seems to always run into financial trouble and you were just enjoying a nice evening with your wife. Photo by: Twotadpoles

“Joe, listen, I hate to bother you but…”

Here it comes.  You could almost repeat the words along with him.  This seems like a quarterly event with ol’ cousin Larry.

“…you think I could borrow a couple hundred bucks from you?”

And there it is.  It only took 5 seconds to get to the money this time with Larry.  And he seems to be raising the stakes.  You told yourself last time that you would never loan money to him again unless he starts paying you back.

“Larry, I don’t know man, I’d love to help you out but…”

Before you could finish your sentence he jumps in.

“Joe, I really appreciate you.  You’re the only one I feel comfortable enough to even ask.”

Is that really a compliment you think to yourself?

“Joe, I hate to do this to you again and I know I haven’t paid you back from the last time, but the brakes went out on my car and I don’t think I have any room on my credit card to get it fixed.”

“Larry, you need to start paying us back from the other times I’ve given money to you.”

“Joe, I know, but if I don’t get these brakes fixed, I won’t be able to work, which means I’ll never be able to pay you back.”

“Fine Larry, how much exactly do you need…”

Perpetual Help vs. One Time Help

So what would you do if you were Joe?  Would you loan money again to cousin Larry knowing that you’ll probably never see that money?

Now what if we changed the scenario a bit.  What if it was Larry’s first time calling Joe for help and he never seemed to have a history of financial difficulty in the past?  Would that change things?

Should you help a family member or a close friend who always seems to be in financial trouble or is it better to let them suffer through a hardship to “teach them a lesson”?

Should you financially help your friends or family at all?

My aim in this post is not to provide all the answers, but rather to get you thinking and hear from you.

Why You Should Help

If you are a Christian, we are called to be generous people.  We’re called to love our neighbors as ourselves and to help the weak, the poor and the disadvantaged.  We’re called to be a loving and gracious people.

So we should help others because God has helped us.  After all, God gives graciously to us even when we don’t deserve it.  Why should we hold back from helping others.

We should also help friends and family because if the roles were reversed we would want our friends or family to help us out too.  It’s the old Golden Rule principle – Do unto others as you’d have them do unto you.

Again, if you are a Christian, giving or lending money can be a good way to be a testimony of your faith in Jesus.  Perhaps it can open a door to talk with your friends or family about why you are willing to help them.  In fact, Christian lenders can be a great testimony in the midst of their lending.

Lastly, the money really isn’t yours anyway.  Everything we have belongs to God.  When we have an open hand, loose grip policy on our money it frees us up to view our money as a tool to be used to help.

Why You Shouldn’t Help

Any time money is involved with friends or family it is typically a messy situation.  Have you ever noticed that?  Money has a power over relationships that causes a lot of stress on friendships and family ties.

When your friend or family member doesn’t pay you back right away it makes seeing them at get-togethers an awkward experience.  You don’t want to always talk about the situation or ask when they are going to pay you back, but you just want to know.

There’s a real possibility that you may never see that money again.  Then what?  Do you kick ’em out of your circle of friends or un-invite them to Thanksgiving dinner?  Again, it can be awkward.

Lastly, you may not want to give because you may not be helping, but rather enabling this person to continue in their bad money habits.

What Should You Do?

I believe Dave Ramsey will tell you to never loan money to friends or family and there is probably some good wisdom in that.

I think if you choose to loan or give money to friends or family you should perhaps lower your expectations or get rid of them altogether and tell yourself that if you never see the money again that it’s okay.  Again, having a loose grip on the money will prevent you from harboring a lot of bad feelings toward the person you helped.

Maybe the best answer is “it depends”.  Maybe it depends on the need and the situation and helping should be prayerfully considered on a case by case basis.  A friend who lost his job and is struggling to make ends meet might be a great opportunity to give and not be concerned about getting paid back.

Whereas, dealing with cousin Larry who constanlty maxes out his credit cards and always seems to be in a tough spot financially may not be the wisest person to help.

What Would You Do?

Have you had experience in giving money to friends or family?

What are some things you would caution against or things you would do differently?

Is there a right answer?

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