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Understanding The Potential Repercussions Of Letting Friends Borrow Money

In all likelihood, you have a friend or family member that has currently hit rock bottom. This individual is likely desperate for money and they’ve decided to turn to you for assistance. If you’ve got the extra money, you’ll probably feel the urge to hand it over. They would do the same for you after all. However, you should seriously consider the consequences before handing your money over to a friend or family member. Anything could go wrong and it could lead to major repercussions. They’ll be explored in greater depth below.

No Security Blanket

When it comes down to it, the mass majority of people will let friends borrow money with no security blanket. In most cases, you will not require your friend to sign a contract before you hand over the cash. Attempting to get your friend to sign such a document could put a major strain on your relationship. So, what is going to happen if your buddy misses on a repayment or refuses to pay at all? You could potentially take them to civil court, but the chance of getting your money back is truly slim to none.

While it might not seem friendly, you should seriously consider forcing the individual to sign a written agreement first.

A Blind Friendship

The mass majority of people feel an obligation to trust their friends. This may never result in any consequences, but putting blind trust into a friend can have severe repercussions. This is definitely true if you’re lending the individual cash. If you fail to carefully vet the individual in question, you’re seriously putting yourself in a risky situation. There is a possibility that the individual in question could have a horrible credit history. They may have defaulted on loans in the past.

If you’re seriously considering lending a friend money, it is pertinent to make sure you really know that individual. Learn about their credit history and make sure you’re not going to get burned.

A Friendship No Longer

Unfortunately, lending money to a friend can have far wider consequences than you might imagine. Even if you’re only giving the individual a few hundred dollars, your relationship could still easily go sour. There is a possibility that you’ll be forced to deny the request or your friend may request to pay it back. This will immediately deteriorate the relationship you share with the individual in question. As soon as you say no or your friend defaults on loan repayments, a negative opinion will be forced and great strain will be put on the relationship.

To avoid this from happening, it is best to never lend money to friends and family members. At the same time, you should never ask these individuals for money, unless it is necessary to do so.


Allowing your friends to borrow money can be risky. If you’re going to do this, it is pertinent to make sure you use a written agreement. Also, keep records of each repayment up to the point that the entire loan is repaid. This will protect both parties and help to keep your friendship intact.

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