Should I Lend Money to Friends?

If your best friend suddenly loses their job and you know they're falling behind on their payments for things like rent or a mortgage, how can you best help them out? Should you offer to let them borrow money? And if they ask you for money, should you say yes? These are potentially really awkward conversations to have with anyone. You want to be a good friend and you want to help if you can, but at the same time you don't want to make them feel uncomfortable or hurt your relationship by bringing money into the equation. If you do loan them money and they never pay you back, that can seriously damage your relationship with them. I've definitely been in this position before and usually I find it really hard to know what to do, but I have learned a few things about what not to do. Let's dive into those hard questions. One of the first things to consider is actually your own financial situation. See if you're in a position where you're able to help someone. Do you have your own finances under control, including an emergency fund, so you feel stable enough that you can provide some support to someone you care about? If you do, then it's time to consider the next issue, which is the other person's finances. Has your friend or family member had financial issues come up before or is this a one-time crisis that they need help getting through? It's also a good idea to consider your relationship with this person and how it could be affected or even ended over a financial dispute. Are they a member of your family that you would always want to help out no matter what or is it a friend that's already strained the boundaries of the amount of assistance you feel comfortable providing? If you do decide to help this person financially, you might never see the money again. The maximum amount that you want to give is the amount that you're okay with not getting back, so it can be helpful to view the money as a gift and not a loan. If it does need to be a loan, then you want to be sure to specify when you expect to be If you are sending money, it can be helpful to use peer-to-peer apps like Venmo or PayPal. That way you have a written record of the money sent and you can use those same apps to request money back when it's time for them to pay you back if it is a loan. You can also offer to help without giving money but assisting them in other ways. Maybe you can send them a week's worth of groceries through a delivery service like Amazon Fresh or a few meals through a meal kit like Blue Apron. You can also send restaurant meals through a delivery app or give them a gift card so they can make their own choices. Another option is to offer assistance with their LinkedIn and other social media profiles that help them in their job search or send referrals or news about job openings their way. Maybe you can even just spend an hour listening to what they're going through and let them vent. No matter what, helping someone you love who is struggling can be hard, but if you do it in a way that protects your finances too, then you can feel good about it without worrying that it's putting you in financial danger. And if you decide not to give your friend a loan, don't feel bad about it. There are a lot of ways to be a good friend that don't involve money. I'm Kimberly Palmer, personal finance expert at NerdWallet. We're here to give you smart and comforting answers to your most uncomfortable money questions. Leave any questions you have below and subscribe.