When a friend is in need, we go all the way out to help out, and in most cases we give away our hard earned cash. But we all know that money can ruin relationships. So how do you know when it's good to lend out your cash? And how will it affect your personal or business finances?

There are steps you can take to save your relations where money is involved.

When a friend wants to borrow money from you, for big loans ask what s/he needs the money for. Be grave with the question at the same time you must genuinely show concern over his/her financial troubles. Be sure to get the most honest possible answer.

After s/he explains the situation, it's best to say that you would have to consult your budget if you can afford to lend her/him the amount needed. Wait for at least two or three days before deciding to lend. This will give your friend time to look for other ways to get the money while you try to learn more about her/his situation from other friends and his family.

Some exceptional situations involve medical emergencies and business proposals. With these first cases, it's really hard to refuse when the life of a person is involved. Hence when a friend is asking money from you for a business purpose, then you would have to clarify if he's asking you for a loan or he's inviting you to be an investor or a shareholder. This condition calls for more extensive research and thoroughly thoughts especially if you're being asked to be an investor. Cited: fitzvillafuerte, 2011.

Before you lend the money!

Are you ready to give the money to your friend? It is good to ask yourself first the following questions:

1.    Can you imagine what would happen if your friend doesn't pay you back?

2.    How will that affect and change your relationship?

3.    Could you live and handle the possible consequences?

It may also help to ask how exactly s/he is planning to pay you back. Where will s/he get the money? Will s/he be paying through installment or as lump sum? What will be the payment schedule?

If the date that you have agreed on has come and gone and you still haven't seen your money, do not just keep quiet and hope that s/he will give it to you soon. Chances are s/he has genuinely forgotten. Don't keep quiet; let her/him know how you feel. If s/he's a friend worth keeping s/he will respect your feelings and pay you back as promised. If not, it's time to find a new friend. Cited, All4women, 2011.

Sources:

• Fitzvillafuerte
• all4women

Page Updated: 26 January 2012