When friends don't pay you back
Posted
Oct 23 2008, 03:44 PM
by
Karen Datko
Rating:
When you lend money to a friend and he doesn't pay you back, what do you do? Enlisting the aid of the Soprano crew is not an option, so do you sulk, get mad, get even, or pester the person until he cracks?
Fitz at Ready To Be Rich has some potential solutions, but first, let's examine whether you should lend money to friends at all.
Our approach is to give rather than lend if a friend needs help. That eliminates the possibility of hard feelings. We learned a sour lesson many years ago when we unwisely stretched our resources to lend a friend several hundred dollars, and later learned that when she came into some cash, she bought a new couch and didn't pay us back.
(In fact, not being repaid can really eat at you. Fitz writes: "Each month that the loan remains unpaid, you lose more hope of getting your money back. Consequently, feelings of anger and resentment toward your friend begin to consume you.")
Our partner blogger, Donna Freedman, is more comfortable with lending to friends, even though, she recently wrote, "some people to whom I've lent money in the past wound up repaying only part of it. Sometimes, life just happens that way."
If you make the loan
An article at MSN Money suggests you have a frank conversation with your friend about his or her financial situation before you decide to make a loan. You'll then have an idea of whether you'd be throwing good money after bad.
If you commit, Donna and Fitz say, you should lend no more than you can afford to lose. Get the terms in writing, another MSN Money article advises.
From there, Fitz offers suggestions on how to proceed. Among them:
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Remind your friend about the loan several days before repayment is due. E-mail works well.
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If that deadline is missed, set a second date no more than three weeks in the future. Again, remind the friend.
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If that date is missed, have a talk to agree on an alternate payment arrangement.
"Sincerely ask him the reason why he's having a hard time meeting the payment deadline," Fitz says. "Don't be emotional during this talk." Your options include accepting smaller payments over time or an item your friend owns that has a value equal to the amount you're owed. Or, you can have your friend do some kind of work for you. Or you can forgive the loan and try to forget.
