The Do's and Don'ts of Lending Money to Friends: A Woman's Perspective

Lending money to a friend can be difficult ground to cover regardless of gender, but it can be even more complicated for women. The general stereotype of passivity, everlasting empathy and unending nurturing may convince friends and family that it's harder for us to say no, especially if they're in dire need.

While even lending small amounts of money can be relatively harmless, as long as you can afford it, it can strain relationships if friends fail to repay their loans. Avoiding awkward conversations is simple; you just need to know the do's and don'ts of lending money to friends and how to handle it as a modern woman.

This article provides clear guidelines for lending money to friends from a woman's perspective.

The Do's of Lending Money to Friends

Here are some Do's when you're thinking of lending money to friends:

1. Set very clear boundaries

One of the most productive things you can do to protect yourself as a woman is to set clear boundaries when lending money to friends. People might assume you're willing to roll over no matter the sum they're looking for, so communicate clear lines in the sand before you write a cheque.

Your boundaries can be made up of how much you're willing to hand over and can't give any more. You can also establish boundaries like only being willing to lend in emergencies. Creating clear boundaries on financial matters with friends before you lend any money can help you avoid feeling taken advantage of and protect your financial well-being.

2. Compile a written agreement

Another good way to protect yourself is to create a written agreement, such as a family loan agreement. This can be a basic agreement that is informal, such as an "IOU." These can be beneficial for small amounts of money, so you might not need to outline any other agreements outside of the amount loaned to your friend.

For more significant sums of money or loans with more risk involved, you can draft a loan agreement that expresses the loan date, the amount, and how the borrower intends to use the money. You can then outline the repayment terms, such as monthly instalments, and include the date when you expect the loan to be repaid in full.

While interest can be challenging to discuss with a friend, you can add a clause that states the interest rate if the amount isn't paid in full by a specific date. You should also discuss the arrangement if they fail to pay or miss an instalment date. The result of this discussion can then be added as a separate clause on your loan agreement.

3. Establish clear lines of communication

Communicating your expectations and concerns about the loan is an excellent way to ensure your friend knows the risk of lending money. If at any point you're uncomfortable with the arrangement, it's important to say so.

You should also encourage your friend to be open about whether they feel they can repay the loan in full or are confident about meeting instalment dates. Not only can talking avoid awkward confrontations, but this is also a good way to manage your expectations and ensure you can plan for any uncertainties in repayment.

4. Consider alternatives to lending

If you don't feel comfortable lending to a friend or are unsure that the loan will be repaid in full, consider an alternative to lending, like gifting a sum of money. This may be a better alternative to smaller amounts and can take the pressure off both the borrower and yourself, as it establishes a clear expectation that the sum won't be repaid.

If you don't feel you can lend money, consider directing your friend to an alternative, such as budgeting or finding resources like financial counselling. As a woman, it can be difficult to simply say "no," but by finding alternatives, you can still support a friend during their time of need without risking your financial stability.

The Don'ts of Lending Money to Friends

Here's what you should always avoid if you're lending money to friends

1. Lend more money than you can afford

One of the most obvious things to avoid when lending to a friend is not lending more than you can afford. Although you might want to be a supportive and loving friend, your financial well-being is equally important. Always assess your financial health before lending to avoid additional stress and anxiety from financial hardship.

2. Be pressured into not pursuing a repayment

Alongside a fear of saying no, you should never be guilted into not pursuing a repayment. Not only should you never let anyone take advantage of your generosity, this is an important part of protecting your boundaries, maintaining a strong sense of self, and establishing clear expectations with your friend. You can overcome this by communicating openly and encouraging the friend in question to be honest about whether they can repay their loan.

3. Let it become the focus of your relationship.

We rely on other women in life to empower and uplift us, so don't let conversations about loans overcome your relationships. Having open conversations before you loan money to a friend will help you avoid having money-driven interactions. If you're concerned about how money may affect your friendship, sit down and talk about it to avoid building resentment toward the borrower.

4. Lend to friends with a history of extreme financial trouble 

While you want to help your friends through the ups and downs of life, you should find ways to prioritise your financial well-being. Try not to lend significant sums of money to friends with a long history of financial problems like debt or late loan repayments. Alternatively, direct them towards finding financial help resources, or offer your time to help them create a budget to manage their finances more productively.

Final Thoughts

Supporting friends through hard times and showing compassion and empathy makes women powerful, but it should never be to our detriment. By following these do's and don'ts of lending money to friends, you can protect your friendships and your financial well-being. Ensure you understand all the small details associated with lending to friends to ensure you avoid financial stress.

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