In tough financial times, people often turn to family and friends for help.
Most people want to be supportive of the ones they care about, so it can be difficult to feel like you are letting someone down by not doing everything you can to help them in their time of need.
But sometimes, especially when it comes to lending money, the best thing for everyone involved is to just say “no.”
Refusing a request from a family member or a friend is not like turning some anonymous applicant down for a bank loan. It may result in hurt feelings, resentment, or even long-term damage to the relationship if not handled properly. However, if you accept, it could result in a very expensive mistake.
A loan, in essence, is a business transaction. Even if a loan is made without any interest, or with an open-ended payoff date, there is still an understanding that the money will be repaid.
So what, then, are you to do when the borrower breaks the agreement? Call them daily like a collection agency? Send a henchman to go break their thumbs like in some bad old movie?
This is where things begin to break down between family and friends when money is involved. But saying no can cause problems as well and should be handled with care and understanding.
Here are some suggestions on how to tactfully deny a request for money from someone close to you while still helping through their problem.
Tasked with helping parents financially? Read:
Don’t Wait to Give the Bad News
When put in the awkward position of having been asked for a personal loan, it’s tempting to say, “let me think about it” to keep from having an uncomfortable conversation. But if already set on saying “no”, you’re not doing the other party any favors by delaying the inevitable. They may need to move on to other sources of help immediately.
Don’t Be Judgmental About Their Situation
Chances are, you know the person who is asking you for money. You may already know them as someone who makes poor financial decisions or who doesn’t live up to their obligations.
Although you may feel that the person may need a stern lecture on fiscal discipline, it’s unlikely that it will go over very well when paired with the disappointment of being refused a loan. It’s best not to rub salt in a fresh wound—read more from Real Simple here.
Offer Other Ways to Help
Let the person know that you are not abandoning them. After all, if they came to you they saw you as someone that they could turn to in a pinch. Together, you may be able to figure out a way for you to help them in some other way.
You might be able to talk them through their finances and help them find some sources of cash they haven’t thought of yet or give them advice on finding other lenders.
You may even be comfortable giving them a small part of what they’re asking for as a gift—perhaps as, say, an advance on a birthday or holiday present. Gifts of money between friends don’t carry the same pitfalls as loans do.
Just making the effort to offer some assistance, instead of simply turning someone away, can go a long way toward smoothing over the rejection and mending fences.
Be Consistent with Your Loaning and Borrowing Policies
The easiest way to justify saying no to a loan request is to explain that you don’t loan money to friends and family as a matter of personal policy.
But this is a more difficult position to take if you are known to be someone who has lent money to others (or even to the same individual) in the past. It’s even harder to explain that line of reasoning if you are a frequent borrower yourself, thus the adage, “neither a borrower nor a lender be”.
When we lend money to a friend, we put ourselves in a position to lose our money and, perhaps more importantly, lose our friend as well.