Think twice before asking your friends for money
A recent Time/Rockefeller Foundation Poll found that 58% of 18 to 29 year old respondents have had to borrow money from a friend or relative in the past year to meet expenses.
Although borrowing money is usually done with the best intentions, the risks are high. Too often, the lender in put in the unfortunate situation of being left without their money and possibly your friendship. If you choose to take the risk, consider the following advice:
Don’t test their limits. Ask yourself if your friend has money they can afford to lend. You don’t want to put your friend in the same financial situation as you’re in.
Put it in writing. If you choose to borrow money, treat the loan like you would any other business matter. Discuss the terms of the agreement and put the details in writing. Be sure to list both parties involved, the interest rate, due dates, payment amounts, and penalty for late or missed payments.
Understand the potential impact. Sometimes, the lender assumes a position of power by expecting special treatment from the borrower. Is your relationship strong enough to handle this new dynamic? Prepare for the worst. Make sure you are comfortable with your friend’s attempt to collect if necessary. Worst case scenarios can end up court. Also know that if your friend could write the debt off as non-business bad debt on his or her next tax return.
Finally, if you do ask for a loan and are denied, try not to take it personally. Perhaps your friend knows that lending you money may not be helpful in the long-run. After all, friendships are priceless.