A CASH-strapped friend asking to borrow $1,600 for rent might tug at your heartstrings — but experts warn saying yes could cost you far more than the cash.
One concerned reader admitted it was their first time experiencing something like this and wanted advice on whether to make the hefty loan.
A pal’s plea for a $1,600 loan for rent could affect both your wallet and your friendship[/caption]
People who ask for rent money once will likely do it again, and it’s rarely a one-off[/caption]
Writing to MarketWatch’s advice column The Moneyist, they admitted: “I have never been asked for money before and I have heard mixed reviews on lending people money.”
In response, columnist Quentin Fottrell didn’t mince words: “It’s OK to say no.
“You’re not a bad person if you say no, and it doesn’t make you a bad friend.”
Fottrell explained that if a friend turns to you for rent once, chances are they’ll do it again.
He said: “If your friend asks you for money for rent, she will ask again.
“If she finds herself in debt, and knows she has exhausted your pocketbook or patience, she will ask another friend or acquaintance to help her out.”
And it’s rarely a one-off.
“You may not be the first person your friend has asked and, if you say no, you probably won’t be the last,” he warned.
Price of being ‘soft’
Fottrell recounted one man’s nightmare tale of lending money to family and friends.
He said: “Bit by bit, his friends and family borrowed $120,000, none of which he saw again…
“These ‘friends’ were users and abusers… It was ‘Adios, amigos!’”
He added: “There is, on occasion, a high price to pay for being a soft touch.”
If you say yes
For those still tempted to help, Fottrell stressed that the decision should be made with eyes wide open.
He warned: “Only give it if you can afford to never see that money again.”
A rock-solid loan agreement is a must, he said, with clear terms, repayment details, and ideally notarization to avoid disputes.
The IRS even limits how much you can claim back as a capital loss if the loan goes unpaid — capped at $3,000 a year.
Friendship on the line
Ultimately, lending cash to pals risks more than your bank balance.
“Once you loan money, know that the balance could shift, and your friendship may never be the same again,” Fottrell cautioned.
And if your mate tries to make the loan a condition of your friendship?
“In that case, there wasn’t much of a friendship there to begin with.”
It’s not a bad thing to say no, but if you do say yes, only give it if you can afford to never see it again[/caption]
