Why You Shouldn’t Loan Money To Friends and Family5 min read

Don't Loan Money To Friends or Family

7 Reasons Why Not To & 3 Ways To Say No Without Ruining The Relationship

Have you ever had the experience of lending money to friends or family with the expectation of them paying it back only for them to let you down and not repay?

How did this make you feel?

Did it change your relationship?

Did you find yourself feeling a tinge of anger or even envy if they then turned around and took a vacation or bought some new clothes or bought whatever fill in the blank item that didn't seem necessary to you?

I can tell you, from experience, that loaning money to friends and family is a bad decision.

Check out these 7 reasons you shouldn't loan money to others and 3 ways how to say no when people ask you to borrow money.

What Happened To Me?

When I was in my early twenties, one of my friends fell on hard times. We, being my wife and I, decided to help them out and let them stay with us for a little so they could get back on their feet. They were, of course, a good friend and it seemed like the right thing to do. As a few months passed, our relationship began to become stressed due to our conversations sounding more like a landlord trying to draw rent money out of a tenant that is past due.

It was no longer fun because the debt between us had caused ill feelings. After being behind about three months, we had to make the hard decision that my friend would have to leave. Things hadn't really gotten better for my friend, but we couldn't afford to keep them there any longer. This, of course, was a hard conversation that occurred and ended up ruining the friendship. As time went on, things never really patched up as they never repaid.

It will change your relationship. You will see things, experiences, and even blessings that that person does in a different light. You will have the feeling that they should be paying you back rather than doing XYZ thing.

Loaning money to friends or family will change your relationship...and not for the better Click To Tweet

7 Reasons You Shouldn't Loan Money to Friends and Family

Check out these 7 reasons you shouldn't loan money to others and 3 ways how to say no when people ask you to borrow money.

  1. Loans to family often end up being open ended since terms don't get set and they are often made with a handshake or just verbally.
  2. Not being a true creditor, getting paid back by family or friends puts you at the bottom of their priority list.
  3. When you don't want to damage the relationship, you might find it harder to ask for the money back.
  4. Dave Ramsey always jokes that "Thanksgiving Dinner isn't the same". This is because you are no longer just family, you are also in a payment relationship.
  5. You are actually enabling your family and friends bad behavior when you lend them your hard earned money.
  6. What happens if you end up in a pickle and need the money? It would be really hard to get blood out of a turnip as the saying goes.
  7. You could end up actually letting the loan cost you your money or, more importantly, your friendship.

Check out these 7 reasons not to loan #money to friends and family: Click To Tweet

How To Say No Without Ruining The Relationship

So, what can you do to make sure that you are being a good sibling or friend but still setup proper boundaries with them?

Don't feel pressured to lend the money to them.

If they are trying to put pressure on you, you could always ask for more time or flat out refuse. Don't back yourself into a corner. It may feel like you have no other alternative because they are "blood" or whatever. But, they aren't your friend or sibling because of your money.

Use the "I have to talk it over with my spouse" method.

Basically, you are just stalling for the time being, saying that you can't make the decision yourself and that you have to talk it over with your spouse or financial accountability partner. Although this may seem like you are not in control, if you are married, this does affect them as well.

Picture of my wife and I sitting at a guest table at a wedding.

My wife, Jennifer and I at a guest table of one of our friends' weddings.

Don't make any exceptions.

You don't want to be caught giving money to one sibling or relative but not willing to make the same deal with another. This can cause even more strife in the relationship.

3 ways to say no to #lending #money when friends or family ask: Click To Tweet


By not loaning money to your friends and family, you are actually loving them well. You are putting up proper boundaries that will grow your relationship stronger in the future. However, in case your borrowing money situation ends badly like mine has, there's hope that the relationship can be restored.

A few years passed and I actually ran into this friend. Seeing this person again brought all the feelings back to the surface. I decided to take things in a different direction, I wanted to restore the relationship, so I told my friend I forgave them and that the friendship was more important than the debt. This was a big shock to my friend. They accepted, we hugged and moved forward.

Our relationship is nowhere near as good as it was in the past, but we aren't hostile any longer. I will say, forgiveness on this has not been a one time thing. I still have feelings that make me angry from time to time and I have to go through the forgiveness process in my head occasionally. It has been a hard lesson for me to learn, but it was a powerful one.

Now, after going through all of this, if you still want to help your friend or sibling out, there is one way you can do it. Your relationship is worth more than a $50 loan or whatever money is at stake here.

If you are in the position to, you could always give them the money with no strings attached. This means that you don't get to have a say in how they spend the money, although you could require them to take some financial steps in the right direction before you give it to them like getting them to start creating their monthly budget, paying off debt, or building some savings. By doing this, you are becoming a blessing in their lives and not just another creditor looking to collect. You remain on their team this way.

This post originally appeared on GetConnectedDad.

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Steven Goodwin

Owner/Blogger/Consultant at MyFamilyOnABudget
Steve Goodwin, a stay-at-home dad of two girls is passionate about finances and is helping others just like you get out of debt and build wealth handling money God's way. His goal is to inspire people like you to gain control of their finances by destroying debt and building wealth using their cash flow.
Posted in Finances.

26 Comments

  1. Lots of good points here, but it can be hard advice to adhere to when we want to help. I guess we need to decide what to do ahead of time and stick with it!

  2. Yeah, this one is a toughy. Unfortunately I’ve been on the other end of this story. Sometimes we fall into hard times and do need help. But I totally see where you’re coming from. Lending money brings up a whole lot of issues and I agree it can change relationships. I do however think that it can work in some special situations, like mine 🙂 But it would be wise to stay away if at all possible!
    Jolleen Ruiz recently posted…Happy Fall Y’all!My Profile

  3. I love this. My pastor is always saying, “if you can’t give it for them to have, don’t loan it.” The bible teaches us that we shouldn’t owe anyone anything but love. If I can’t let you have it, I can’t let you borrow it.

    • Tiffani, I agree completely! I have been on both sides of this transaction, unfortunately. Both times it completely changed the way I thought about the other person too. I remember always thinking about what the other person thought of my spending while paying money back and thinking way too much about the other person’s spending when they owed me money. Giving it away if possible has been a much better blessing in our family’s life. Thanks for reading and commenting!
      Steven Goodwin recently posted…Why You Shouldn’t Loan Money To Friends and FamilyMy Profile

  4. Great post. My husband and I have found ourselves being asked by family for money and have often had to deal with being called all kinds of ugly things because we have chosen not to go that route. But no we see that they are better for us not “helping” them in that situation.
    ELIZABETH MARSHALL recently posted…Making Morning the Best TimeMy Profile

    • Yeah, living with family can be tough when there is nothing in writing to bind the agreement. I had my brother stay with me for a year before my wife and I got married to help with the bills. It was a great time for us and I remember we were very close, but I could tell that we were at different stages in life. I was past the partying stage and he was just beginning it. When he moved out, he had quite a few parties at his new place and then learned why I didn’t like having them as often LOL. But, it was a great experience for me.

      That being said, I most likely wouldn’t buy a house with family to live in together… We just all need our space.
      Steven Goodwin recently posted…Why You Shouldn’t Loan Money To Friends and FamilyMy Profile

  5. totally agree with you, I do not loan money if it is something that is needed I purchase it or pay for it. I do not give cash but I do help my family and friends and do not expect the money back. That way I helped without the relationship being broke if the money is paid back it is a bonus not expected

    • Pamela, I couldn’t agree with you more! It’s truly amazing when we can give to others in need and not expect anything in return. We had a great experience where we were able to give a car to a family member instead of trading it in so they could use it to get back and forth to work. It was a great help to them for about a year before they eventually traded it in when they moved up in vehicle.
      Steven Goodwin recently posted…Why You Shouldn’t Loan Money To Friends and FamilyMy Profile

  6. Yes, the key words here is ‘loan’! My parents taught me to never loan money to friends or family with the expectation of being paid back, instead just make the money a gift if you can afford to give it–and I’ve seen them live out their values many times over the years, when someone came to them asking for a loan and left with a gift that covered their immediate need. We absolutely should, when we can, help out our dear friends and family when we can, with no strings attached. My little brother and 2 of my sisters are working their way through college–I’m older, I’m already finished with college and that particularly difficult time of life, and I’m grateful that I can send them $100 once in a while to help them out. So many people have been generous to me when I’ve needed help that I know the value of being generous and giving whenever I can!
    Rachel G recently posted…More Homesick in SummerMy Profile

  7. I would loan money to friends and family if they desperately needed it, but I would have a contract written up and notarized. Relationship always trumps rules for me, and I would not want a relationship regret hanging over my head. Like, someone got very sick or something happened that was out of their control, I would want to provide love the way they did in the early church in Acts. Acts 4:32
    Money is going to die with the rest of the world when we die, I wanted to be faithful with it because it’s a tool that God has given me, but I do not want to put it before a relationship.
    Thanks for sharing

    • Can I ask if you had a contract written up and notarized, how would the relationship trump? What’s the point of the contract if you are going to value the relationship above?
      If someone fell on hardship and something out of their control, that is the best time to be giving instead of loaning money. That way you are part of the solution and not just compounding their problem.
      Act 4:32 NIV says “All the believers were one in heart and mind. No one claimed that any of their possessions was their own, but they shared everything they had.” I don’t see how this means that they loaned it to each other with the expectation of getting it paid back.
      Steven Goodwin recently posted…Why You Shouldn’t Loan Money To Friends and FamilyMy Profile

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