Friendship is a thing of beauty and creates the enabling environment for people to help each other especially in times of need.
However, when it comes to lending money to a friend, you better think twice before taking a decision. This is because many friendships have ended because of monies owed one party.
It is always good to help a friend, but issues relating to money are often complex and that’s why lending money to friends and family members is not something to be encouraged.
Below are five reasons why you shouldn’t lend money to people close to you:
1. Encourages bad financial habits
The one lending the money may have good intentions, but on the other hand, it could encourage bad financial habits on the part of the borrower.
If your friends know that you will bail them out of any bad financial situation, they get themselves into, then they’ll never be able to develop good money habits.
This is one of the major reasons why lending money to people you are close to should be checked.
2. You may never get it back
There are times when you will lend the money out to a friend or family member and you will never get it back.
This is very common because most friends feel like once they are close to you, they are not obliged to go the extra mile to pay back.
Others will pay half and not return the rest, but because of your relationship with them, you won’t be able to do anything about it.
3. It ruins relationships
Lending money to a friend is the nice part, but in collecting it back, you become a debt collector. Research has shown that nobody likes debt collectors.
So, although it is your own money you are collecting, it is very easy to pick up a fight with your friend if he or she fails to pay on time.
This could ruin your relationship with the person forever, especially if his or her late payments continue for a while.
4. You many need the money urgently
Emergency situations almost always pop up in our lives. Such situations demand contingency plans, but what if you lent your last saving to a friend?
That is the more reason why it is not appropriate to drain your savings to help out a friend because it could leave you in the same position as them in the near future.
If the situation is so bad, you could even find yourself also borrowing from another person, which is not ideal.
5. Follow ups are boring
It’s different if a customer owes a bank and has a collateral to offset it in case he or she defaults.
But if you lend money to a friend or family member, you will have to always be following up.
These follow ups are very boring and usually very awkward as well. And, because the person is your friend, there will be very little you can do.
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