Just recently a former college classmate of mine reached out to me to borrow money. He explained to me why he needs it, I sympathized, and having some extra cash on hand, I agreed to lend him the amount he needs.
Borrowing money is not an unfamiliar situation for me. I fully understand this because I experienced the same years ago. I reached out to friends, classmates and former colleagues. Some refuse, some obliged. And I never disappoint when it comes to paying back, I always make sure to pay it back on time.
As I get older and experienced being both the debtor and the creditor, I see the sentiments of both sides. However, it is no doubt that it is way too stressful to be the creditor. You have something valuable that you lent to someone — money; the risk of not being able to get it back is on you, and what’s worst is you have to deal with a person who may or may not return the money.
And the feared scenario happened. That former classmate of mine borrowed money and vowed to pay on a certain date; unable to pay, he asked for an extension; and asked to give him some more time until I can’t wait any longer. He kept on promising to pay on paydays in the last two months, yet, only when confronted with heated words did he return (just a part of!) the loaned money. Unfortunately, until now half of the money is not returned and I still keep on following up.
This situation taught me a very hard lesson on dealing with people when it comes to money. It also taught me about how I handle things that have to do with cash. I guess there’s a bit of truth in the saying, “Money changes people” because the money shows you the good and the bad in people.
Here are the seven tough lessons I learned when lending someone money:
- Any connection, whether being relatives, classmates or colleagues, is not a guarantee, nor should be leverage to honor a loan to someone you know. Some people will reassure you that they will pay you back by virtue of your “closeness” with them. It does not always work. Sometimes it even becomes the excuse for not paying the loaned money back.
- Only loan someone money that you can afford to lose. In my metrics, being unable to get a less than Php500 loan back from someone who owes me is already stressful but I can let it pass. However, when we are talking about a loaned amount worth a thousand or so is something that is serious to be dealt with. I worked hard for that money, almost equivalent of a day’s worth of pay so I can spend it on my needs and wants, and not just to give away to somebody else.
- Be patient and understand if your friend or relative will not yet be able to pay back what he/she owed. There may be circumstances that kept them from doing so, however, know when to stand your ground if paying back seems to be taking too much time or they keep on delaying payments, telling you all sort of excuses, committing to pay yet does not do so, etc.
- Do not fall prey if debtor friends/family go on I-am-a-victim mode and employ a guilt-trip on you. Stick to the point of why you are interacting/dealing with them: they are to pay back the debt, you need to get your money back.
- Do not be afraid to ask for the money back. Maybe it is a cultural thing but in my country, it is very common that the creditor seems to be the one shying away from collecting what he or she is owed, thus the loaned money tends to be buried in memory. You deserve to get your money back. Do not hesitate to ask it back.
- Anticipate that there will be huge repercussions if the money matters get settled or not. If not resolved amicably, relationships will get ruined; if money gets returned, trust issues and communication gaps arise.
- The next time someone reaches out and attempts to borrow money from you, do not be afraid to say “No”. It is better than risking losing an amount that is too much to be lost. That is your hard-earned money, and you have the right to choose where to use it and what to use it for. Do not think that you are being a bad person for refusing to help out someone in need. It is not your job to save everybody or deal with their problems. You have to protect yourself from being taken advantage of, from being used and abused and from carrying the burden of getting money to replace the money you lost from lending it to someone who did not pay it back.