Wow. You gave him a huge debt for his birthday? How… sweet.

No really, I’m thinking you’re on a WHOLE other planet than the rest of us. I think this discussion is about “loaning money”, not, um, “simultaneously handing someone a gift and an installment plan for them to pay for their own gift”. I’m not sure what that is, or why he would ever agree to it. I suspect strongly that his version of the story is quite different from yours…

When you see a friend in pain, it’s tempting to try and take that pain away. But what happens is that you end up enemies and suddenly you turn out to be the bad guy because of their personal choices.

If I was a millionaire who’d been happily married for 25 years, I would give advice to anyone who listened. But I’m not. So anyone who needs help in those two areas of life, I recommend professionals who can help them. That way, I help my friends and keep their friendship as well.

We have “loaned” money to my BIL before. I say loan because we got paid back, and it was a note guaranteed by my MIL. We have also previously “Loaned” him money that has not been paid back. Those times, I just sort of sigh and shrug it off. But after he got his GF, we no longer loaned or gave him money period. Now he was supporting someone else with our money so it was a no go.

Hi Trent – I discovered your email series only recently, and it is really good. Thanks for sending it, and I can’t fathom how you have the energy, time, and insight to write or assemble all this material.

I like to file some of these, and was wondering, would it be possible for you to include some key words in the Subject Line to indicate what is in the email? That way I can find certain topics later on.

For example, in the May 25, 2007 email, you could do:

Simple Dollar: Home Tools; Family Travel; Home Loans

Thanks!

Jack Rasmussen
jrasmussen@austinlogistics.com

If you think your friend really needs your financial support and you decided to lend the money, here are few tips on how to strengthen your relationship instead of destroying it.

1) Make it a partnership, win-win relationship. Make sure your friend understands this is not a favor but an investment that you are doing. In addition to the loan return maybe you would get some interest, maybe he can return you another favor, such as baby sitting your kids while you go out for the night.

2) Put the terms in a written agreement, with a complete payment schedule.

3) Sign the loan in front of a third party, which could be a mutual friend or a professional.

4) Build a system which makes the loan and repayment as automatic as possible. Use web based p2p payment systems, such as google checkout or paypal or p2p lending website as zopa

5) Be a “gentle rock”, flexible but firm. If your friend cannot repay the loan under the current terms, try renegotiating them. If you cannot, transform the loan to a gift.

6)Make it clear at least for yourself on your decision be it a “No”,loan,or a gift. 99% of the time friendships are much more valuable even in financial terms then the sum of any possible loan.

That’s the nice thing about being frugal. You can then use your acquired money for fun things :)

I did the same with my parents. They made more interest than they were making in their money market account, and we paid less interest on the money than we would have paid. It was a win/win situation.

We did things formally, with an agreed-upon payment schedule, and he was loaning me money from his savings (he intended to put it in a CD or something with a higher yield than savings).

In the end, he made more than he would have from a CD, I paid less interest than I would have on the credit card, and it worked out well for both of us.

I didn’t treat the loan like a loan from a friend, I treated like any other loan. Just because you know the person doesn’t mean you don’t have to pay them on time or as agreed.

I would never loan or borrow from a friend on a “pay me when you can” basis for any real amount of money.

I have lent a large sum of money to a friend and it hasn’t changed the friendship. He was in a financially precarious situation and I had the means to help. We signed an agreement and I made it clear that the loan had to be paid monthly but it was separate from our friendship. Sure he’s missed a few payments but I tell him to get it to me asap and he will.

I think the key is making it completely business when it comes to the loan and separating that from the friendship.

BUT…I do agree that if you loan money to a friend it *can* turn sour but if you have a good friendship and two people who can separate the money issues from the rest of the friendship, it can work.

I don’t think I’ll ever loan money to a friend. You’re right the dynamics of the relationship changes. The borrower is almost enslaved by the debt.

I have never used this or any similar service, nor have I registered as a user, but it seems like a concept with potential for cases of this sort.