Think twice before you give a loan to a friend, family member

Let me say from the word go that I am writing this fully aware that I might lose friends and sour family relationships. But please indulge me—let us not personalise issues but discuss ideas sincerely.

Most of us have faced this dicey financial situation at some point. A relative or a close friend comes to us with a tale of woe about some great financial disaster that has befallen them, then they ask you for a loan to help them get through it. Your heart wants to help them, but your head says no because you know they are unlikely to pay back. What do you do?

My one piece of advice on how to handle this situation is simple: never, ever loan money to a family member or a friend unless you are triple sure they will pay back. “Aha! There he is! We knew it. No wonder he has always been jumpy giving a loan when we approach him.’’ I can loudly hear some of my relations and friends saying. “Adzatifuna nthawi yina—kuno nkunja!” I hear that sister of mine muttering. Well, I may not have given you a loan, likely because I was so sincere in that I did not have money – otherwise I could have given you without expectation of pay back.

Yes, sounds harsh not to loan family and friends resources when re-payment is doubtful. But I can tell you with all the confidence that you are better off politely telling them you can’t loan them (if you really can’t) than souring your relationship forever (especially if its big monies involved). You see, the moment you lend money or any resource to family members or friends, you will have added another dimension to your relationship—a business relationship. By adding this dimension, your relationship will never be the same again.

If you feel like you must give them the money because you empathize with their situation, then make it a gift not a loan. In extreme cases, do call it a loan but make ready provisions to write it off and never ever ask for them to pay back. This way, there is no burden of debt in the relationship—you are giving the money with no expectation of return. The beauty is they will be unlikely to ask you for another loan unless they are so foolish or circumstances necessitate that they do come back before they can repay the first loan.

But how do you say ‘no’ to your friends and family without seeming like the ‘bad guy’? The most important thing you can do is to listen carefully to their tale and ask lots of questions. Many times, your ear and your advice are more valuable than a loan. Before you tell them ‘no’, do a little research with them to find other solutions to their situation. If they are sinking in debt, look into debt management counseling. If they have got an emergency expense, look for ways that various strategies can help cover the burden. This way, you can both come out of this with some education and sustained friendship.

When you finally need to make it clear that you won’t loan them money, state that the reason you won’t loan them money is because the relationship you have with them is not something you wish to taint with a financial arrangement. You should also offer any sort of non-financial assistance that you can offer: a couch to sleep on, some home-cooked meals, some professional advice, and so on. These are all worthwhile things you can give with minimal financial impact.

One fear that many people have is that saying no will damage the relationship. It will only damage the relationship you have if you just let it sit there and forget about it. Keep in touch with the person who requested the loan and ask them how their situation is going. This is an important moment—the person is in obvious need, so you need to be involved in their life right now, even if it is not on a financial basis. You may be able to help them in non-financial ways right now.

In short, loans aren’t always the answer—love and an open ear are sometimes the answer to our friend’s request for financial support. Buy hey! Help relations and friends if they are really in trouble—otherwise, you may also sour relationship if they think you have the money and you can’t give them. It all depends on how understanding your friends and family are.

A blessed week-end to you and yours, especially to my friends and relations.