Money matters always seem to be a taboo topic among friends. Passive income, investments, savings... The list goes on. Of all these, the most awkward topic to deal with is likely to be loans. Perhaps you've been in the hot seat before – what seemed like a casual catch-up session turned out to be an appeal for money instead. In that short span of time, you have to think of the right response. What you say could either make or break the friendship. If you were ever in such a situation, here are some tips to deal with it if it comes around again.
1. Consider your friend's background
First, you would want to consider you friend's reason for borrowing money. Your friend might be pressed for money due to an unexpected emergency, such as the hospitalisation of a family member. In such a situation, you would want to help your friend as much as you can, and loaning might be an option. However, if you know that your friend needs money to pay off a gambling debt, be weary. You would not want to perpetuate a bad habit by making it easy for your friend to borrow money each time he burns his fingers.
Second, consider your friend's background—job status, reputation of borrowing money and most importantly, character. This might seem to encourage a biased attitude, but your friend's background does make a difference. If you know that your friend has a habit of borrowing money without returning it, you might want to think twice before offering help. To find out more about his background, you can consult his close friends, but remember to be sensitive when doing so.
2. Consider your own abilities
Before you extend a helping hand, consider your own financial status and the sum of money being requested. If you are currently jobless or financially stretched due to unexpected circumstances, you might not have the ability to help financially. However, if you are currently comfortable and do not foresee yourself desperately requiring that sum of money within the next year, you are most likely financially stable and ready to help.
3. Provide alternative solutions
Apart from immediately digging into your pocket to pull out the money, there are alternatives to help your friend. Instead of lending money, you could offer to find out more about the procedures of taking bank loans and about the current interest rates for borrowing. Additionally, you could look out for job opportunities if you know that your friend is seeking employment. There is no fixed list of alternative solutions you can provide; you should tailor them according to your friend's unique background.
4. Learn to say “no”
Saying “no” is extremely difficult but necessary in certain circumstances. If you have lent money to a particular friend multiple times without receiving it back, perhaps it is time to get tough on the subject. Lending money on a long-term basis is not a feasible solution and will not help your friend in the long-run. It would be more beneficial to determine the root cause for your friend's need to borrow money and to tackle it accordingly.
We know how precious your hard-earned money is to you. You might want to help a friend in need, but you should not harm yourself in the process of doing so. Keep these few tips in mind to protect your finances, and don't be afraid to turn down a friend's request if you have to.