Those who have been reading this blog for a while may remember that I loaned a friend money last year. I am happy to report that the loan was paid off this week. This was quite a bit later than the original schedule. I could have received the loan payoff this spring but I knew that my friend was struggling financially so I let the payment slide until he was better able to pay it. As a financial transaction the loan wasn’t a success but as a favor to a friend it worked well. He has done plenty of favors for me over the years so I was happy to give him a loan. The funny thing about this loan is that my friend probably makes about three times as much money as me and is single and yet I’m the one loaning him money.
Loans to friends and family can be tricky. They usuallly aren’t profitable, often don’t get paid back and frequently cause issues in the relationship.
It’s good that your friend was able and willing to re-pay you!
This was the only friend I would have loaned money and I was prepared for it to take a while to be paid back.
Having more money doesn’t necessarily equal financial security, I’m learning. A friend of mine makes $120k/year (which is 55k more than me) and yet she’s constantly borrowing from her parents & friends. It’s sad, really.
Glad the loan got paid off!
Fascinating point. Goes to show that income does not equal wealth or cash flow!!!
His income has increased a lot in the time I’ve known him but he always increases his lifestyle to match his income.
From a strict financial sense, yeah, as a general rule it’s not a good idea to loan money to friends or family. But there’s so much more to life than money, and in the end, you have strengthened your relationship with your friend…and who knows how he might be able to help you out should ever find yourself in similar trouble. Prudence and care is always parmount when loaning out money, but life is more than dollars and cents…glad it worked out.
Brad
This friend has helped me out when I was struggling financially which is part of the reason I was willing to loan him money. I was confident that I would get paid back eventually.
I’ve been wondering about this myself. The idea of muddling the water of a friendship scares me, but the helping out a friend while making 3-5% piques my interest.
Do you think you’d loan out money again if you had to?
I probably wouldn’t loan out money again unless there were special circumstances.
I’ve never liked the idea of mixing relationships and loans. Too many ways for the loan to get in the way of the friendship and change the relationship altogether.
If I’ve got a friend in true need, I think I’d rather give him a gift and be done with it so I don’t have to worry about whether or not he’ll pay me back and whether we’ll still be friends if he doesn’t pay.
I’d probably throw in some money management education along the way too so he doesn’t ask again ;o)
As a general rule, I don’t loan money to family or friends. I recently paid a debt of a very close friend after she put herself in a potentially dangerous situation. I have half the mind to tell her to pay me my money back. This kind of behavior is really getting old.
I would never give a friend money and call it a loan.
Better to give it without strings.
If they pay you back down the line fine, if not fine.
I am glad to learn that the loan is now paid off. Good for you and your friend. Yes, most of the time, loaning out money to a friend or relative may put strain to the relationship. Thus, same with Frank, when I give a friend or relative a certain amount, I make it a point that they really need it and will be used properly as I do not expect that it will be returned.
I am happy it worked out with your friend…scary situation if it went south