How should you handle the situation when your friend wants to borrow some money? Here are the reasons why lending money to your friend is a bad idea.


1. You are not really helping

There is a saying which goes…

“Give a man a fish and you feed him for a day, teach a man to fish and you feed him for a lifetime.”

By lending your friend money, in a way, you will be giving him or her a free pass. Your act of doing so may not actually be in their best interest because you may be condoning a bad habit such as gambling, or even something less serious but which most people are guilty of, which is living beyond their means. Say no the next time a friend asks to borrow money. He or she will then have to find a permanent solution instead of depending on you.


2. You may never get it back

When it comes to lending money, the rule is to only lend the amount of money you are prepared to not get back. Most of us are brought up with the notion that, “when you borrow money, you pay it back”. But life is not always that simple and straight-forward. When you lend money to people you know, they may take repaying it lightly because of the relationship.


3. Money changes things

Money has a way of revealing strange sides of people. By lending money to your friends, you may find yourself parting with your money, and quite possibly your friendship. This is because lending money to your friend may cause awkwardness. The borrower (your friend) is now indebted to you. While you as the lender, may fear offending your friend so you avoid reminding or asking them about repayment.

See also:  5 Polite Ways to Ask for Your Money Back


4. They might ask for more

Your friend may have used the foot-in-the-door technique without you, or even them, realizing it. The foot-in-the-door is a psychological compliance tactic. It involves getting a person to first agree to a small request because later the person will be more likely to comply with a larger request. Your friend may first ask to borrow a relatively small sum, such as RM100. But after you have agreed to lend the smaller sum, you will be more likely to agree when your friend asks to borrow a larger sum of money the next time. Once your friend has successfully borrowed money from you, chances are the habit may not stop, and the amount might even increase.


5. You may need the money

None of us has the power to see what the future holds. So if lending money to your friend requires you to take money out of your emergency fund or savings, don’t do it. It’s best you keep your money for your own rainy days and instead give friendly suggestions to your friend on how to better manage their finances. Instead of borrowing money from you, suggest a debt consolidation plan to your friend to clear off some of their debt and/or work with a personal finances advisor.


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What are your thouhts on lending money?