A good friend who is in need and comes to you for financial support: your first thought may be to help him or her out of the fire right away. But how wise is this?
“You should walk with friends, not act,” they say. This means that you can better separate your friendships and business interests. But lend money to friends in trouble, what’s wrong with that? And is such a loan also a business interest? To start with the latter: yes.
Borrowing money from friends involves risks
No matter how tempting it is to get a good friend out of the fire right away: first ask yourself to what extent this is wise. A friend with a hole in his or her hand will not be inclined to save until the moment that an acute problem occurs. A washing machine that collapses, a leaking roof, an unforeseen repair to the car … There may be many reasons why someone comes to you sooner or later with the question whether you are “advancing” something. But lending money to friends who have great difficulty keeping their finances in order makes the problem worse than solving something. After all, a loan must also be repaid and the question is whether that will happen.
Disadvantages of lending money to friends
Precisely because it is a friend, it is about more than just money. If the loan is not repaid (on time), you will not only lose your money, but your friendship will also come under pressure. The question is whether you are waiting for this. And if your friend’s financial situation does not end well, a private loan cannot be included in any debt restructuring.
Still lend money to friends? Then take the following into account:
- Only borrow money you can miss. If the money is not repaid, you will not get into trouble yourself.
- Clearly agree in advance when and in which terms the amount must be repaid.
- Specify the loan and the conditions in a contract, especially if it concerns a larger amount, what you both sign.