Eight Common Reasons to Decline Lending Friends and Family Money

Written by on December 12, 2012 in Money - No comments | Print this page


lending-money-to-familyHow many times have family members or friends approached you for a personal loan? Have you been uncomfortable with the request or couldn’t find a polite way to refuse it? How many times have the loans not been repaid or your requesting it caused hard feelings in the borrower? Read on for some of the most common ways to decline the awkward requests. They might help you find a way around the tension.

Reason #1: You Are Underemployed.

Yes, the economy is still tough, and un- or underemployed friends may not be able to use that college degree, but jobs still exist. Failing to get a job or a second job to make ends meet is the most common reason friends ask friends for a loan.

Consider yourself a second unemployment check-and-balance system. If someone approaches you with this reason, you do have the right to ask for proof: For what jobs has the person applied? How many applications have been submitted? Is the person looking for income or job specialty only?

Reason #2: You Live in a Larger Home Than You Can Afford

Very few people with large, extravagant homes truly want to downgrade to a smaller, less expensive home, but when the homeowner cannot afford that large of a home, alternate arrangements are necessary. Whether the person puts the home up for sale or seeks to rent a room or even vacates the whole property to rent the property out as a whole, living arrangements that are not within budget is a prime cause for financial trouble.

Reason #3: You’re Materialist and Refuse to Sell Belongings

While a 52-inch HDTV might be cool to watch, or three high-tech computers, laptops or tablets are cool, selling excessive electronics can earn significant funding for the short-term.

Reason #4: You Play the Lottery Consistently

Yes, if someone wins a jackpot, the winner is often set for life — or files bankruptcy within two years, but those winners have beaten enormous odds. Spending $5 per week on Lotto tickets equates to $20 to $25 less per month for gas, food, utility bills and more.

Reasons #5: You Refuse to Eat Leftovers or Take Your Lunch

What budgeter doesn’t understand the value of saving leftovers? Food purchased, cooked and tossed out always wastes money. Who wants to lend money to someone who arrogantly wastes it?

Reason #6: You Cannot Outline Your Income and Expenses

If someone doesn’t know how much is made and spent each month, that person is probably financially irresponsible. Who trusts that type of personality to repay a loan?

Reason #7: You Spend Frivolously

Paired with Reason #4 and others, failure to track spending almost always leads to frivolous spending. What kind of financial credibility does that portray?

Reason #8: You Refuse to Sign a Loan Agreement

This is one of the most irresponsible behaviors on both the borrower and lender. Just because the borrower is a friend, one should always get a loan agreement in writing. If the borrower is truly a friend, he’ll understand. If he objects, asking you if that’s how you treat friends or if you don’t trust him, he probably has vague promises and will probably not repay your generosity.

As time goes on, the loan can mentally transform into “gift,” which needs no repayment. Protect yourself: Spell everything out with loan amount, interest if applicable, and when and how the loan is to be repaid. Ensure you also list the penalty for non-compliance, assumption of ownership of proper collateral, for instance.

This is a guest post.  Written by Jaye Ryan, a freelance author who loves writing about financial management and lending issues.

Image courtesy of Stuart Miles / FreeDigitalPhotos.net


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