It’s a tricky one. We want to help our nearest & dearest out, especially if they’re in a bit of a pickle, but lending cash to friends and family also leads to trouble. Here are five reasons why you shouldn’t do it.
Proverbs 22:7 says that the borrower becomes a servant to the lender. Many people who borrow money from others have this feeling. It can give you the mindset that the lender somehow has power or a voice over your decisions. If you owe them money yet they see you buying something instead of paying them back, it can get awkward.
‘Lends’ are not seen as a priority. If you owed money to a bank or loan company who were adding interest every day, you’d pay them back. Most friends or family loans are done without interest and without any proper agreement. So they aren’t paid back as a priority. There is no motivation or sense of urgency.
You enable their problem rather than finding a solution. If you give them £300 to pay off a credit card bill, it’s often just the tip of the iceberg. What about, instead of throwing money at the problem, you help them to budget, get to grips with their own money management and find a proper solution to their money woes?
They might ask for more. What do you do once you’ve already given once? It’s harder to say no when you first said yes. What if you need the money? If you lose your job and you literally need that money to survive? You need to put food on the table for your family, you need to pay your household bills. Who do you then have to turn to? They obviously can’t help you out as they still owe you what you lent them.
Your relationship could be damaged by a couple of hundred pounds. It might not get paid back, is it worth it? Go down the route of saying “I’ve heard terrible stories about families lending money to each other. We don’t want to be one of those do we?” This will then allow you to be there to help them find a solution without a pay out from your bank account.
Don’t forget, there are organisations like CAPuk who help those in debt. I’ve previously blogged about it and you can find out more information here. I’ve also written about facing debt head on and not being an ostrich when it comes to debt, see that post here. Finally, one other blog I’ve written is about getting your finances back on track with some tips on how to save money every day. See that post here.