City thinking, local knowledge

What to do if a Loved One Asks to Borrow Money

By Questa Chartered

Lending money to a friend or family member can be one of the most sensitive and complex situations you might find yourself in. The intersection of personal relationships and financial transactions can often lead to discomfort or even conflict. A study by VibePay reveals that 8% of UK residents steadfastly refuse to lend money to friends or family, highlighting the potential risks involved. So, how would you respond if a loved one asked to borrow money? Let’s look at the steps you ca take.


Assess Your Comfort Level


Deciding whether to lend money is a personal choice, heavily influenced by past experiences and individual comfort levels. According to the same study, 13% of respondents are uncertain and possibly willing to lend money depending on the circumstances but are not committed to the idea.


These statistics suggest a significant reluctance, possibly due to previous disagreements—nearly a third have had fallouts over money issues.


Confront Non-Payment Issues


The aftermath of lending money can sometimes be as uncomfortable as the initial request. The VibePay survey found that more than three-quarters of lenders feel awkward asking for repayment.


A quarter of respondents avoid asking altogether because they find it too challenging. This avoidance often leads people to prefer indirect methods of communication like texts or phone calls to request repayment, which might seem less confrontational than face-to-face discussions.


Set Clear Boundaries


It’s crucial to set boundaries before lending money. Clear terms regarding the amount, the purpose of the loan, the repayment schedule, and the method of repayment can help mitigate future misunderstandings. Here are some steps to consider:


Establish Ground Rules

Before handing over any cash, discuss and agree on clear, written terms for repayment. This agreement might include:


  • Timelines
  • interest (if any), and
  • what should happen if a payment is missed.


Communicate Openly

Ensure that communication lines are open. Discuss what might happen if the borrower encounters difficulty making payments. Adjustments can be made, but these should be the exception, not the rule.


Be Prepared to Say No

Remember, it’s okay to refuse a loan request. Financial stability should be your priority, and if lending money would jeopardise that, it might be best to decline. Offer other forms of support instead, such as helping them find financial planning services or advising on budget management.


Conclusion: Financial Empathy vs. Financial Stability


When a loved one asks to borrow money, the decision should not be taken lightly. It involves balancing financial empathy with personal financial stability. While it is important to support friends and family, it is equally important to protect one’s financial future.


Set clear guidelines, communicate openly, and do not hesitate to say no if the risks outweigh the benefits. Ultimately, preserving both financial health and personal relationships should guide your decision-making process. 


By following these guidelines, you can manage such requests tactfully and thoughtfully, ensuring that personal bonds are strengthened rather than strained.

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