Borrowing and lending money: the dos and definite don’ts

To quote Bill Shakespeare (or one of his characters, at least) ‘neither a borrower nor a lender be.’ To quote me (a fan of Shakespeare but nowhere near as skilled as the Bard) ‘borrowing and lending money can be a potential friendship anthrax.’ Now, when I sat down to write this article, I had no idea that a few short months ago Amy Rowe wrote something on a similar topic. This should tell you two things: 1) Amy and I are both awesome and probably wonder twins separated at birth. 2) We have both experienced the shitty world of borrowing or lending cash!

Now, I’m not saying you should lock down your wallet with some sort of chastity belt, or that you should allow yourself to go bankrupt before you ask for help, but I thought I’d focus this post on etiquette you can follow, whether you’re the borrower or the lender.

Borrower’s Rules

First of all, pick your potential lender carefully. This will depend on the amount of money you need to borrow. Never ask a new friend/acquaintance/person you met on Tinder for large sums of money. By large sums, I’d say anything over a cup of coffee is out. If it is for a coffee, always offer to get the next one if it’s within your means. Family and close friends may be willing to lend you large(er) sums of money if needed, but never ask someone you know if they’re financially struggling themselves.

Secondly, if you’re borrowing a larger sum you should always agree your terms up front. How will you pay them back? Will it be in a lump sum, or instalments? Would they like you to pay interest? How long do you need the money for? Do they want you to sign anything to formally agree the terms? The lender might turn all of this down and go down the ‘pay me back whenever’ route, but it shows willing if you offer to lay out terms. It also takes the pressure off them if they want terms but are embarrassed to ask.

If you’re borrowing a larger sum you should always agree your terms up front. How will you pay them back? Will it be in a lump sum, or instalments?

Thirdly, don’t ever assume the money is a gift unless the lender explicitly tells you it’s a gift or tells you not to pay the money back. As it’s not a gift, paying the money back should be your priority. That means, it looks pretty tasteless to splash out on an expensive treat for yourself when you still haven’t paid back the money you owe. This is another reason why setting out some form of payment schedule is good – you know how much you’re paying the person back each month and you don’t have to feel guilty if you catch their eye while buying a pint.

Lender’s Rules

Firstly, don’t lend more than you could afford to give away. Ask yourself this: if the borrower never pays me back, will I still be able to pay all my bills? It’s not an ideal situation, but it’s a good rule to follow. That way, if they struggle to pay you back, you won’t have the stress of knowing you are now going to struggle yourself. I’m not saying it’s cool if they don’t pay you back, I’m just saying don’t go broke to help someone else out.

Secondly, set some terms, even if they’re loose ones. ‘Just pay me back when you can’ is shorthand for ‘just have the money’ to some people, so if it’s a large sum, set up a payment schedule. If you’ve ever seen Judge Judy, you’ll know that this is where people often fall down – when they don’t set out terms for repayment. If it’s a small amount, maybe say ‘I’ll just get it back next time I see you’ or something to that effect. If it’s a tiny amount, you may choose to write it off, or suggest they get lunch next time you’re out.

Don’t lend more than you could afford to give away. That way, if they struggle to pay you back, you won’t have the stress of knowing you are now going to struggle yourself.

Thirdly, if the same person keeps borrowing money off you and not paying it back, you may need to operate some tough love with them. Maybe offer to help them go through their finances to see where they’re struggling, where they could make cuts, or if there’s any support they’re missing out on. If they keep borrowing money they can’t pay back, they’re going to find themselves in a real financial black hole. It’s kinder to help them out than bail them out.

These are just some suggestions that might help you if you find yourself borrowing or lending cash. Whatever you do, remember to stay cool. No amount of money is worth ruining a friendship for!