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Lending Money to Friends or Relatives

I realised that alot of readers like me to share my personal experience on financial matters.

Afterall, pure textbook knowledge about financial planning matters are available everywhere and sometimes, humans learn best from the experiences of others. I have thus created this tag on personal experience where I share my very own personal experience with readers and hope that you will be enlightened by it too. My personal experience are not textbook examples of how you should deal with your personal finance. It is how I dealt with my personal finance given my unique circumstances and scenarios. Sometimes, I acted against head knowledge because I treasure certain things more.

Lending Money

Lending money to friends or relatives is a common issue that crops up in personal finance. Very often, we might get unexpected requests from friends to borrow some money. I am not talking about $10 kind of money because they forgot to bring money with them. I am talking about them borrowing money that ranges from the hundreds to thousands of dollars.

I have one principle I use when I lend money to others. My father was the one who taught me this:

"If you ever lend money to others, treat the money as gone."

This is indeed a wise saying.

Once you decide to lend money to somebody, you should be prepared to write off the debt and the treat the money as a gift to them. If you are not willing to do so, then do not lend them any money.

Once you lend a friend or relative money, it will be very difficult to get the money back. It is a "face" thing amongst Chinese I guess to never ask people to repay back loans especially if they are close friends and relatives. So you will basically be at their mercy when it comes to repayment unless you have bothered to draft up a comprehensive IOU statement.

I am glad to say that I have lent money to friends and relatives on two separate events. I thought about it and asked myself whether I was willing to GIVE away this money and treat it like I will never get it back. Both times, I decided that I was in a position to give the money as my finances was good. Afterall, I view myself as only a steward of the money that God has entrusted me with. I also figured that since this people dared to ask me, they must really need the money.

I am glad to say that I got repaid back both times. One was paid back in a few weeks while the other took a few years. I did not ask for any repayment at all and did not charge any interest. To me, the money was a gift to them and getting paid back was considered a bonus.

I know of people who have lent lots of money to others and have failed to get their money back.




4 comments:

  1. I have yet to collect back any of my money from 3 friends and a relative :(

    One of the friend did constantly let me know of his financial situation. I have written off the other 3 as bad debts as they have just disappear.

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  2. Hi axt,

    Hope that the amounts are not that large. It is usually difficult to collect back the money that you have lent to friends and relatives.

    Question is: Will you still lend money to friends and relatives if they ask you knowing that you will never get paid back?

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  3. No worry small amount. I take it that I spent a few hundreds to get to know a person better. I think it is worth it.

    As to the other friend whom have kept me todate his financial status, amount is 8k. Actually he intend to pay back but we told him to settled his other debtors first. His case is a sad story. To cut the story short, marriage went wrong which bring down his business, house, etc and life.

    Well at least he is now almost back to norm.

    As to your question, if it is genuine I will still lend. But to those whom still owe me $, you can forget about it!!!

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  4. Hi axt,

    You must indeed be a kind soul. Not many people are so willing to part with their money. I guess you are one of those rare breed of friends.

    Like I said, sometimes, friendship is more important than money. But one must avoid being over generous at the expense of your own financial situation.

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