What to Do if a Friend Asks for a Loan

by Emily Guy Birken · 4 comments

friend asks for a loan
It’s one of the most dreaded moments in a long term friendship. Your friend calls you up, tells you her sad tale of financial woe, and then asks “Is there any way I could borrow X dollars until Y date?”

No one likes being put on the spot like this — you feel like saying no will damage your relationship, but you know that money has a terrible habit of damaging relationships. So how do you handle such a request and still feel good about yourself and your friendship (and your own finances) afterwards?

friend asks for a loanIf you need to say no…

If you cannot financially afford to help out your friend, then you have to say no for your own protection. Lifeguards are taught that the only thing more tragic than one person drowning is two people drowning. It’s the same idea with finances — the only thing worse than your friend having financial trouble is if her problems become your problems.

Remember first and foremost that you do not have to explain why you are saying no. Your friend is asking you the favor, and even Miss Manners would not require you to say any more than “I’m sorry, but I can’t.”

However, depending on the strength of your friendship or the hardship your friend is facing, you might find yourself wishing you could help even if you don’t have the cash.

Why not ask your friend if there are other ways you could help? If the problems are job or career related, offer to network for them or go over their resume. If the issue is credit card debt, offer to connect your friend with some credit counseling. If your friend simply can’t make ends meet this month, offer to cook some meals or even let her crash with you for a few days.

The bottom line is that there are many ways to help your friend. You can make sure your friend knows you care without having to jeopardize your own finances.

If you can say yes…

You must tread carefully, even if you do have enough money to cover the loan. One way of making sure that the loan cannot come between you and your friend is to make it a gift, instead.

In the case of a gift, there is no sense of resentment if your friend has trouble repaying you. You can let your friend know that she can give you a gift in return when she gets back on her feet — or she can pay it forward to help someone else.

If you decide to actually go through with a loan rather than a gift, be completely businesslike about it. Tell your friend you will need to have a contract between you that spells out the total amount that you will lend (so that there will be no repeat visits to the Bank of Friendship), the repayment plan, the amount of interest you will expect, if any, and what will happen if your friend defaults on the loan.

When you make it clear that these are the conditions you require for a loan, your friend may decide that he would prefer to go elsewhere for financial help. It may seem harsh to tell a friend that these conditions are necessary for a loan, but neglecting a written contract will most likely doom the friendship anyway.

Uncomfortable moments in a friendship are part of having relationships with others. Only you know what you and your friendship can handle. Don’t feel like you have to do more than that simply because no is a difficult word to say. It’s better to be up front and honest with your response.

The worst thing you can do is to give your friend hope by saying you will think about it and then ignore the need all together. Remember that your friend probably had to gather a bit of courage just to ask you for money. After all, not many people wants to be look down upon by asking for a help financially.

Do what you can and be the good friend that you are.

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  • Wow! What a minefield! Generally I’d follow kdt’s advice however, I’ve been on the borrowers side after borrowing £7000 from my dad. I was clear t wanted to pay him back – despite him not asking for it. There are situations where the pride of the borrower would want to repay the money

  • DNN says:

    That’s a good way of doing things. This way, your hopes are not held high about the friend paying you back and you’ll never have to deal with feelings of being let down if they don’t pay it back even if they do have the money to repay.

  • Kdt says:

    Never ever let a friend or relative borrow money. Give it to them as a gift. It’s not worth coming between the relationship. If you can’t afford to give it to them. Don’t let them have it.

    My wife and I always do this. Surprisingly enough, most of the time the same people who would pay a loan back, will give you the money back even if it is a “gift”.

  • DNN says:

    I’ve been through stuff like that before where friends kicked me in the behind and never repaid me my money. Nowadays, tell then to go online and panhandle by starting a GoFundMe.com page. L 😛 L

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