Are you a loaner.

Pop quiz hot-shot, your mom, dad, sibling, child, best friend, or other person of whom you are bound to by affection or obligation, approaches you and says “Hey, I have an unforeseen bill coming due and was wondering if I could possibly borrow some money to cover it?”

What do you do? WHAT DO YOU DO!!!!!!!????

Obviously I made this hypothetical situation vague for a reason.

  • If your brother comes and asks for a $20 loan to put gas in his car so he can make it to his first job interview, you’ll probably loan him the money.
  • If your best friend asks for a $500 loan so they can fix a leaking pipe in their basement, would you help out then?
  • What about if your mom or dad needed $2,000 to catch up on mortgage payments they fell behind on?

Shades of gray. There is no one size fits all strategy when it comes to loaning money to close friends and family. Fortunately, I haven’t yet been faced with a situation where I’ve been asked for a loan, but I’m sure at some point in my life that day will come. While I don’t know exactly how I will respond, I assume the level of emergency will directly correlate to the amount of money I’m willing to loan. $500 loan for a new computer? Heck no techno. $500 for a new alternator so you can make it to work? I’ll probably help ya out.

You ever been asked for a personal loan before? How did you respond? Was it awkward?

30 thoughts on “Are you a loaner.

  1. My first response would be to analyse it as a business decision for both parties.

    This may seem cold, but if you can show that the loaner is going to get an acceptable interest rate on the money they lend, and equally the loanee will pay less interest than an equivalent bank (or payday lender) loan, then both parties will be happy and neither will feel like they are doing the other one a favour and feel indebted to them.

    Treating the lending of money to friends as a business decision may not seem like a very “friendly” thing to do at first,. However, it is almost always in the interest of both parties to do so.

  2. I loaned money to both my mom and my sis in the past when they were buying their new apartments. I loaned them over USD 30K both and as soon as their old apartments sold, they paid me back with interest even though I haven’t asked for interest. My mom had loaned me about USD 10K and my BFF loaned me a similar amount when I was buying my current residence. I paid them both earlier than they expected. The interesting thing is none of us asked for those loans instead, the loaners insisted to help not wanting their loved ones get in long term debt with the banks at outrageous interest rates.

    I just loaned my BFF some money since she was having issues with the new apartment she just bought. I am glad I could reciprocate her gesture.

    Other than my mom, my sis and my BFF, I do not think I would like to loan anyone any kind of money. I had some difficulties getting my money back and I promised myself never to make it known that I might have spare money from then on. As far as most people are concerned, I am making large contributions to my retirement account which I cannot touch for ten more years and I am still paying the bank loan on my rental property (which are both true btw) and I have no spare money.

  3. I made the mistake of lending money to a colleague who I also considered to be a friend. BIG mistake. Said friend came to me desperate because they had an unexpected bill and couldn’t afford food/transport to work. We were a week from our (monthly) pay day and this woman was from a two-income household (both parties with incomes higher than either myself or my husband). I expected she might need say $50? But no, she informed me she needed $350…. So I loaned the money. And then I waited. Pay day rolled around and with it a sob story about being flooded with bills and could she pay me next month? Over the course of the month she let slip that the “unexpected” bill she couldn’t pay was her sons private school fees and te reason she couldn’t pay it is that she and her husband were busy paying off their upcoming 2 week cruise…. I was so angry! I was struggling to afford childcare for my son and hasn’t been on a holiday for two years!! …After she finally paid me back a month later it was less than a month before she was back asking for more!! I ignored the request and distanced myself from her after that. Once bitten, twice shy!

  4. I’ve loaned money to friends and family, no questions asked. I gave two friends $300 each at different times in their life to help them cover rent. I have also given my sister a few thousand dollars for medical bills. I know that all of these people really did not feel comfortable asking me for money, but that they were all desperate situations. I had money in savings for a rainy day, the rainy day just didn’t happen to be mine. they all said they would pay me back, but i never signed them into a contract or anything. Honestly, I looked at the money as a gift. I figured if they pay me back great, but if they don’t, then I am not going to let it hurt my relationship with them. These were all one time things, and none of them have asked me for money again. Still good friends with the two people and of course, my sister isn’t going anywhere!

    Had it been more than a few hundred dollars for my friends, or the few thousand for my sister, I totally would have had contract drawn up for repayment, or maybe helped them research personal loans through a bank. Would it be nice to have that money in my savings account? Sure! But i’m glad my friends were able to keep their respective apartments, and my sister didn’t have her medical bills go to collections too.

  5. Depends on the situation for both parties. If the person asking in truly in need and trustworthy I may just give them the cash, not asking for it to be repaid. That’s if I have the surplus cash. I wouldn’t want to loan someone money that may contribute to their overall money problem. They will never learn and just repeat the cycle of borrowing.

  6. I subscribe to what I believe is the Dave Ramsey (or maybe it was Trent from the Simple Dollar) solution. Don’t consider it a loan. If I have the money and I can live with never seeing it again, then loan it. This way if I never get it back, there are no hard feelings, and if I do get it back, it’s found money.

    This has happened twice. Once, a family member forgot to pay their property tax bill and months later had to pay immediately. The other time was when a different family member needed money to make the rent. Both times I had it and both times I “loaned” it knowing that if I ddin’t get it back, I would survive.

    I just never want to have feelings of anger toward a family member who I may have loaned money. Like if they owe me money, but I see them going out to dinner, I don’t want to think, “Hey, shouldn’t they be paying me back first?”

    And if I don’t have it, then I can’t loan it anyway.

  7. My dad said that I should only loan money to a friend when I’m in a situation to give that money away. I’ve only made a loan once, when a friend was in a really bad situation with no way to pay a traffic ticket (about $250). I paid it for him, and then at the end of the year, when he hadn’t paid me back, I forgave the loan.

    So I guess my rule is that I only loan money that I can do without, and since I’m basically making a gift, I use discretion as to whether the person is truly in need of the help.

  8. As far as family goes, if I have it, I give it. I would never want family to pay me back, we just all have an understanding to help each other out when someone is in a tough situation. I recently paid 1000 bucks to fix my mom’s car, and I don’t want her fussing about money for my sake, to pay me back. I just know if I get in a spot and I need a few hundred she’ll be there for me too if she has it.
    Friends, eh, not so much. I would hope they could ask their family first too.

  9. I would certainly make a case by case decision based on the person. My family I would be a yes. Outside of that, there are several of my friends whom I trust absolutely, to whom I would also make a loan if needed (note, I say needed – home repairs, to avoid default, etc). I agree with your assessment that the largest determinant for me (beyond my ability to make the loan) would be the purpose/necessity of the loan to the borrower.

  10. I’ve loaned $500 to my sister for car payments. That will never happen again. She said she would repay in 1 month, but it took 4+ months to pay it off and she stopped talking to me the whole time she owned me the money because she knew she broke her promise. Awkward as hell.

    I’ve loaned $500 to a best friend as an advance. He paid it back with interest in the time he said he would. I would probably do it again. Not awkward at all.

    I’ve loaned $5000 to my parents for mortgage payments. They did not pay me back fully. I would have a really hard time doing this again, and would do everything I could to not do it again. They gave me $3500 cash and then let me take some items out of their house as payment for the other $1500. Hated this situation. Hated it, hated it, hated it.

  11. I’d have to analyze the situation/person asking for the loan.

    I once loaned my sister $20 for gas that she would pay back on the next pay day (we work for the same company)… pay day rolls around… nothing… pay day # 2 15 days later… still nothing… at pay day # 3, I told her it was pretty sad that it’s taking her over 6 weeks to pay back $20; and now, I’ve become a b*tch for asking for the money she said she’d pay back in the first place! It’s not the $20; it’s the promise to paying back when you say you’ll pay back.

    A few months later, she asked for $20 “to buy food for her dog and cat”; I said sorry, I can’t spare it (even though I could; I wasn’t going thru that pay back scenario again). She said I was mean for allowing her pets to starve; I told her if she can’t afford to feed them, she shouldn’t have them in the first place.

  12. All loans that end well are gifts. Most people who are in such bad shape they need to borrow from you lead themselves to that path; why should you be an enabler?

    Personal responsibility isn’t a theory to me.

  13. It really depends on the people involved. I don’t usually lend money, but in very few occasions I will do it. Helping my family out is also important, especially since they never liked to owe anyone money, so I am not ‘wasting’ the money on them, it will get returned.

  14. It would depend on their person, their situation, and my ability to help. I would present it as a loan but for my own sanity would continue to consider it a gift until if/when it’s paid.

    That said, I’ve never been asked, and don’t think anyone would ask me.

  15. Back story… I’m currently in about 50K debt and I’m definitely a loaner… I recently gave my friend $1,000 cash “for her birthday”.. she’s in a really toxic abusive relationship and kept saying she would leave if she had transportation. She owns two cars, but both need repairs, so I gave her the cash to fix one. I told her that she had to use the money for the car but no other strings attached (aka I didn’t tell her she had to leave the relationship or anything like that… I figured that would happen on its own). She used the money to fix the car and stay for about another month.. then very quietly and suddenly, she drove from Ontario to the west coast… I am really happy I made the choice, despite the financial repercussions it had on me. I’m in a very stable, well paying job and am making good advances on my debt repayment. While I would have preferred not adding to my debt, I feel fortunate that she had the ability to drive out west and escape the relationship… who knows what would have happened otherwise…

  16. I loaned $40K to my sister and her husband so they could buy a car wash. They are paying it back over 7 years at a very reasonable rate. I’m very confident I will get the entire sum plus interest back since the business is extremely profitable (and has been for years, I have seen the previous owner’s books). If I don’t get it all back, it would suck, but I could lose money investing in other opportunities too.

    Of course this is a different situation than what you presented. If it was an emergency I would probably consider giving them no more than $5K and assume that money is probably gone forever.

  17. Depends on the situation but most often if we have money I am happy to help people who are stuck. Most situations I just wouldn’t expect the money back. I believe in sharing needs with friends and family. Why should I hoard while someone I care about needs food or has some other need. There is a fine line of enablement though, in which I would like to help offer solutions rather than throwing money at a problem. If someone asked for a substantial amount of money and I had it to lend, it would depend on what it was for and their ability to pay it back and I would set up a formal loan document with a payment schedule. Guess its depends on every situation. But I’ve been helped out so I wanna give that back to others.

  18. My brother in law approached us for a huge loan ($17,000) which we did not have then (I was just starting my career after 11 years of training, no emergency fund, no reserve yet!) My husband so desperately wanted to help him out, he suggested we take out a line of credit and his brother could make the payments. I refused. I said if his credit is so bad that he can’t get a loan himself, why should we think he’ll pay us back? We were working hard back then to get our “house in order” so to speak, I couldn’t fathom putting our goals on hold to pay for his brother’s mistakes. Plus, his brother’s money management skills were abysmal. Not to mention the relationship was already on shaky ground from historical family “stuff”, and I figured a defaulted loan would only be another risk to maintaining the relationship. My husband felt badly when he told him we couldn’t help him out, but then he declared bankruptcy instead, and his partner told us that had we loaned him the money, he would have just kept living in the delusion that he could keep his head above water (he needed way more than the amount he asked us for) so really, we did him a favour by giving him a wake-up call. Go figure. I agree with others that if you can’t afford to lose it, don’t loan it!

  19. I was the recipient of a loan once. My brother had a car he was trying to sell and my husband and I were looking to buy a used car so he could commute to work. My brother makes a lot more money than we do and he didn’t NEED the money form the sale so he said he’d sign the title over to us and we could pay him back as slowly as we needed. Total amount was $2600. We paid him back in about 6 months. He was expecting it to take 2 years for us to pay him back but I would never let something like that hang over my shoulders even knowing he didn’t care about the money

  20. I’ve never loaned someone money – the thought of doing that kind of makes me want to have a panic attack right here and now! When it comes to friends, I’d just be extremely concerned that I wouldn’t get my money back, or back in a reasonable amount of time (or the time frame we agreed upon). I may feel this way because the only people who have ever asked me to loan them money are people who I knew were financially irresponsible and habitually made poor decisions with their money. As far as family goes, I think Carolyn G put it best.. if I have it, I’m happy to help out when I can and I don’t expect my Mom and Dad to pay me back – I think I cost them enough money as their kid!

  21. No, I wouldn’t loan anyone money. However, there is a small group of people I would give rather large amounts of money to if they desperately needed it without expecting the money to be paid back.

  22. I have lent money many times to my friends with the biggest amount being only $1000. I have never not been paid back quickly so I guess I’m lucky or have reliable friends. Most of my friends are doing well now so haven’t had requests in a about ten years.

    For me I would lend money to a friend or relative who happens to be in a tough spot as long as it is not because of repeated stupid decisions. If the person is a disaster and the money will just go into a black hole then I’m not enabling.

    I do agree with the posts that think of it as more of a gift as well since the money has never been an amount that would impact me.

  23. when I was in college a friend of mine called me up in a panic – could I loan him $500 immediately? He needed to put a deposit down on a place to live that he had found that was perfect, but he didn’t have the cash, until he could move some funds – and it was Friday afternoon – the earliest he could get the money would be Tuesday and the landlord wanted the deposit now or he would give the place to the next person.

    I checked my account, and yes, I could do it, but it would leave me short if I didn’t get the money back as promised. I met him at the bank, and pulled out the money and off he went to get his apartment.

    Now – there were some circumstances –

    1) I wasn’t the first person he had called – he had originally called his girlfriend, and she refused him outright, saying she didn’t loan money to friends, ever.
    2) I had known him since we were 5 years old – and while he was a goofball, I knew he was generally good with money, and had a specific timing issue that is why he was short. Yes, he could have been more organized – he should have known he would need funds – but it wasn’t that he didn’t have the money – just not available
    3) I knew his parents – and I knew that if for some reason, my friend decided *not* to pay me back – all I had to do was call his dad and explain the situation, and he would ENSURE that the money was paid back immediately. Also, my mom and his dad were good friends, and had worked together on many fundraisers over the years for our schools – so I knew his dad was very serious when it came to managing money – even if his son wasn’t so organized 🙂

    As it turned out, the following week, he wrote me a cheque and it was all done and squared away.

  24. You haven’t talked about co-signing loans…but this feeds right into the same question.

    Daughter needed us to co-sign a student loan; she promised to make payments, or keep them informed when she was in school, so they wouldn’t bill us.
    Didn’t work.
    We’ve been paying $75 a month for at least two years now, on this co-signed loan. Daughter now has the wherewithal to pay it off…and for a month, at least, has not. We’re waiting to see if she’ll do it before the October payment comes due.

    On the other hand, we borrowed money from Other Daughter for a car — have already made the first payment, and will keep doing it, with extra paid as often as we can. Other Daughter insisted we shouldn’t pay interest — we’re going to, anyways.

  25. I’m more of a loner than a loaner 😛 My wife, more so. Granted, being so anti-social doesn’t make for an exciting life, it also keeps us safe from loan requests. Our general policy is a resounding no when it comes to loaning money out to others. In this day and age, one should be able to borrow money from many sources besides us.

  26. For a small loan that I deemed necessary, I would just give the money to them. That way, no hard feelings either way. I don’t get angry if I never see the money and the other person doesn’t start avoiding me just because they feel bad from a standpoint of owing me money.

    My parents need a short term loan when they were selling their house and moving to a condo. Based on the timing of the closings, they were going to have the funds from closing on their house prior to closing on their condo. I happened to have a fair amount of cash as I was soon buying a house, so I gave them the loan they needed. IIRC, the loan was about $35k, and they paid me back within a few days. I’m not sure I would make that loan to many people, but I trust my parents and I knew this would make there life infinitely easier.

    If I remember correctly, they even gave me an extra 50 bucks or so as my “fee”.

  27. I’m definitely against loaning money. I’ve seen firsthand how it can break apart friendships and family. Instead, if I can swing it, I give money without ever expecting it back to close family and friends. However, I’ve gotten harder as I get older when I see friends who are notoriously bad with their finances get fancy cell phones and electronic gadgets, then whine about not being able to afford tires on their (newer than mine) car. I can’t see myself throwing money at a situation that will never, ever, get better and that I’m not exactly helping if I give them money, especially when I’m not exactly loaded.

    However, if I know the person to be otherwise responsible but simply needing the emergency funds, I consider it perfectly acceptable to give some money, etc. Better to give directly to a family/person in need than to a large charity organization that pays its CEO’s a larger salary than I can comprehend!

  28. I’ve always treated ‘loans’ as a gift; it makes things a lot easier if you don’t get paid back. (that being said, if they didn’t pay me back, I’d be hesitant about giving another one)

    The biggest one was when my in-laws got into an accident out of country. We were unable to go (My DH was recovering from a major surgery). His sister asked for a loan to pay for her trip out to help make medical decisions for them etc. We gave her the money (with a little extra for gush room), and told her it was a gift. We know she is completely unable to manage her money, and that asking for it back would only cause her and us additional stress. We would never loan her any money to pay her own bills though: she is not willing to do anything to mitigate them (cutting cable, getting an older car, driving less etc)

  29. As others have said, I would only do it if I didn’t need the money back. I would probably loan money to my parents or sister & brother with no questions asked. However, my brother-in-law who is 25 frequently runs out of gas money because he’s blown all his money on tattoos or other random crap…so for him, no. I’d probably tell him to start walking. No need to be an enabler, my mother-in-law has that all taken care of already 🙂

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