In the past, I have been unwisely generous, especially when it came to lending money to friends. I would lend money freely, even when my own funds were limited.

I lent money to people because I knew they loved me, believing that love would guarantee payback. I trusted people who had previously paid back small amounts, believing this meant they would pay back on bigger loans. Friends could ask me to get credit for them because, if they said they would make the monthly payments, I believed them and, finally, I lent people money just because they were nice.

Shakespeare said, “Neither a lender nor a borrower be”. I learned, the hard way, the wisdom of those words.

Over the years, I’ve lent money in good faith, certain that it would be paid back. As time has passed, agreements have been broken. Friends have never mentioned the money I lent them, perhaps thinking I would forget. This has left me feeling cheated and ignored, their behaviour has eaten away at the trust and love in our friendship.

Being a good friend doesn’t always mean saying yes. Sometimes, it’s necessary to say no. This, in itself, can be an act of kindness. If your friend asks to borrow money from you, it’s prudent to ask yourself some questions first;

1. Can I afford to lend this sum of money?
2. If I decide to lend them this money, and they don’t pay it back would it damage our friendship?
3. On a scale of 1-10, how likely, prepared and able are they to pay it back?

If you decide to lend your friend money then there are some guidelines you should follow – after all banks don’t give money without specifying terms, and neither should you.

• Establish exactly how much is being asked for (so they don’t come back for more later on).
• Find out when they intend to pay you back.
• Agree whether the money will be paid back in instalments or as a lump sum.
• How regular will the instalments be?
• Decide whether or not you will charge interest and what that amount will be.
• Establish, perhaps by reviewing their budget with them, if they have the means to pay the amount they are promising.

Then you need tell your friend, clearly and concisely, the basis on which you’re prepared to lend the money. Your friend can then decide whether or not, they wish to accept your offer of a loan.

When your friends see you are serious about money they’ll treat you differently. These days when someone asks me for a loan I simply tell them, “I’m sorry I don’t lend money that I can’t afford to lose and, right now, I can’t afford to lose either the money or your friendship”.

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