It is not easy to lend money to a friend or a family member because I do not want to be in a situation where we will have to use legal help to recover my money. Therefore I would not lend money to them to avoid ruining our relationship. The problem with lending money to a friend is that you end up losing the money and the friendship just because they failed to pay back. 

First things first, if I gave my friend a loan, I would not ask for collateral. So what happens when they refuse to pay? Usually the collateral when lending money to a friend is trust. And given the fact that we are human beings chances of the breaching that trust are very high especially where money is involved. The saying that money is the source of evil is actually very true. Money has a way of changing people – stories of people willing to sell their souls for it are not rare.

I would really want to help out a friend but if I’m to give them a loan then I would prefer we do it the legal way with no sentiments involved. But either way, setting the terms for the loan also becomes weird and it’s like it’s a test to your friendship. But if one goes ahead and drafts the terms and conditions then somehow the borrower will be forced to pay back. 

A publication titled "10 Reasons Why You Should Not Lend Money to Friends & Family,” by Casey Slide really provided tangible reasons why one should not offer a loan to their friends or family. For instance the loans to family and friends tend to be open-ended.  The publication further stated that the parties (friends or family) don’t reach an agreement for a timeline for repayments, and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans. This leaves both parties in limbo, and doesn’t set any expectations. The uncertainty can lead to stress as the borrower may worry that the lender expects payment and the lender worries about when he or she will be repaid.

The other reason why I would not offer a loan to a friend is because when they have problems paying back, they start avoiding you like as if you have a plague. They start treating you like you committed a crime lending them the money. The best way to avoid such drama in life and have a healthy relationship with friends is to not loan them money.