Money: Everybody wants it. And everybody seems to want it from you at times — even friends or family members. But if they ask to borrow money, are they really gonna pay you back? Should you even lend it to them in the first place? What should you say when they ask? Alongside Brad Klontz, a financial psychologist and assistant professor at Creighton University’s Heider College of Business, we’re going to navigate this minefield.
So, should I lend money to a friend or relative if they ask?
First of all, a lot depends on the individuals (more on that in a moment). But also, ask yourself: What’s your goal? Is your goal to get paid back? Just by the word “loan,” we can assume that you’d like this money returned. “So, first of all, that’s dangerous,” Klontz says. “Because there’s a chance it won’t be returned.”
What’s the deal with people thinking they don’t have to pay back a loan, just because they know you personally? Wouldn’t you be more likely to pay it back under those circumstances?
In an ideal world, yes. But in reality, LOL! It happens because “there’s a sense that you’ll be a kind, forgiving and flexible lender,” says Klontz. Your landlord isn’t your friend, and he/she requires you to pay them. Same with the bank that you’re getting your auto loan from, or they’ll take your car. But you, sir, are a friend, man — and you’ll understand your friend’s situation, right? At least that’s what your friend (or family member, or whomever) is assuming.
Just as a thought experiment, Klontz suggests asking yourself: Why aren’t they just getting a loan from a bank? Also ask yourself, if you loan your friend/relative money, and then see them wearing brand-new shoes or whatever, are you 100 percent okay with that? If so, go ahead and loan them money. In other words, how emotionally attached are you to that money, and how outraged will you be when it inevitably transpires that they’re not working 24/7 to pay you back? Klontz also says, “The best predictor of future behavior is past behavior. You know this person, so what have they done in the past?” That will really bring it into focus.
How much is the relationship going to change if I lend someone money?
“I had this professor in college who said, ‘If you ever want to get rid of a friend, just loan them 20 bucks. They’ll start avoiding you,’” says Klontz. Just in general, when you’re changing they dynamics of a relationship, it’s always a risky venture. You went from being friends, co-workers, drinking buddies, whatever, and now you’re a lender and a borrower. Which really is as jarring as it sounds — it changes everything.
How come?
Klontz says it’s probably because rarely do you loan something to somebody that they’re obviously going to take and turn around and give to someone else. You’re not even really giving them use of it. It’s not like loaning someone a hammer, or your truck.
So does borrowing money pretty much always ruin relationships?
Yes, it does. Imagine you did a survey asking people if they’ve ever not been paid back. How many people do you think would say no? Between friends or family, Klontz says chronic abuse is more common in families — the reason, of course, is that you can just get rid of a friend, but your sibling is always gonna be your sibling.
The best way to prevent this sort of thing is to simply think of your loan as a gift. That way, it’s a pleasant surprise if it gets returned to you, especially if your friend or relative is someone a bank probably wouldn’t loan money to. But first ask yourself if this gift would be good for them. Like, are you feeding some kind of financial dependence? Or worse, are you feeding some kind of addiction — gambling, drugs, buying shit they don’t need? Take that into consideration.
Say I do actually want to get my money back — you know, an actual loan. How do I make that clear?
Ideally, you make pretty clear plans for repayment. You can start by saying, “If I loan you this money, when do you see yourself being able to pay it back?” And if they say three weeks, then pull out your phone and say, “Okay, so — February 7th, then?” And put it on your calendar. You can already see how this gets awkward fast…
What if I don’t actually want to loan/give them money at all? What do I say?
There are two good ways to do this, says Klontz. The first is to cry poor yourself: “I’m budgeting tightly right now and I just don’t have it myself, sorry man,” or something along those lines. The second is to appeal to a higher authority. Car salesmen do this all the time when they, ahem, go talk to their manager, only to come back with coffee and cigarette breath — plus the unfortunate news that they can’t actually give you what you asked for. It’s a great way to avoid direct confrontation, so just say something like, “My wife and I make financial decisions together, so let me run it by her.” Or: “I should check with my financial adviser.” Put the blame on someone else, essentially.
So no matter what happens, it’s always going to be an awkward situation?
Yep! It’s almost never not awkward. But at least by taking control of the situation, dictating the terms, or just framing how you view the loan, you can avoid quietly fuming about it, stressing about it or losing a relationship out of it. And that’s worth a lot more than the 200 bucks your brother-in-law wants toward that jet-ski downpayment.
Adam Elder
Adam Elder is a writer in San Diego. He's also written for Esquire and WIRED magazines, VICE, The New York Times, The Wall Street Journal, The Guardian, newyorker.com and elsewhere.
