7 Rules of Lending Money to Friends

Being generous and lending money to friends when they need it the most is good. Even if you are in a tight spot, too, it can be hard to turn down their request. Mostly, people shun away from borrowing small cash loan on Aadhar Card from financial institutions due to interest rates or because they have no means of repaying the debt. Instead, they decide to borrow from their friends.

You should help your friends when facing a financial crisis but don’t go overboard. Before deciding how much money you’re willing to lend, consider your financial security to avoid jeopardizing yourself.

Additionally, ensure you set some rules when lending your money. Things could get out of hand, and without a proper and clear agreement, you may find yourselves disagreeing. Here are the top rules for lending money to friends:

  1. Lend What You Can Afford to Lose

The most important rule when lending money to anyone is to ensure that it is the money you can afford to lose. Although your friend may seem trustworthy, there is still the possibility that they could not repay it as agreed. So, ensure you have enough money to lend and still have some remaining for you.

This will ensure you do not find yourself in an awkward situation of financial difficulties when they fail to pay back later. As they say, before you assist another person, ensure your needs are taken care of first.

To keep your stress at bay, it is essential to take the loan as a gift in your mind. This approach will allow you to remain composed and content, even if they opt not to pay back what was borrowed.

  1. Put the Loan in Writing

When lending a huge amount of money, ensure you have a written agreement. This agreement should include the amount of money lent, the date you loaned it, and how the borrower plans to pay you back. Even though this document may not be used in court, it serves as a reminder of the agreement for both parties. This can help prevent misunderstandings which often occur when loans become overdue, or payment plans are changed. Additionally, it will provide evidence if you ever need to take legal action.

  1. Lend to Those You Only Trust

If you’re lending money and expect repayment, lend only to those you trust. Ensure that the person you lend to is responsible and can account for their actions. Providing loans only for friends members who will repay them can help avoid financial stress and emotional issues.

If lending money doesn’t feel right to you and you are uncomfortable with it, tell them you can’t. Even though you may get pushback, it is crucial for you not to give in if the loan could cause any rift in your relationship. On the other hand, you can advise your friend to get short-term loans that are readily available for those in need of funds for their personal as well as business needs.

4. Don’t Let Guilt Force You to Make a Decision

Always think wisely and tactfully when lending money, especially if you have a close connection with the borrower. If anything is making you feel obligated to loan funds, take some time away from the situation. There may be other ways you can help them out. You could tell them to get an instant personal loan that takes minutes to get approved. They will get their funds faster and cover whatever emergency they have.

  1. Ask How the Funds Will Be Used

Before lending any funds, it is essential to inquire about the purpose of the borrowed money. While this may seem rude to the borrower, it is your right as a lender to know how their money will be used. Make sure to ask for a detailed explanation of how the borrower intends to use the money and what measures they will take to ensure its repayment.

  1. Create a Loan Repayment Strategy

When lending money to friends, you must know how and when you will get your money back. Though the question can be uncomfortable, many people can’t ask it for fear of risking their relationship. The lender should always proactively ask the borrower about their repayment plan. Both parties need to outline a clear payment strategy so that each can create budgets and investments accordingly. If it turns out that the borrower does not know how they’ll repay, then forming an agreeable arrangement between them is paramount.

  1. Be Prepared

When lending your hard-earned money, be mindful that repayment may not occur on time or fail to happen. Instead of being startled and reacting irrationally toward the borrower, it is best to devise an appropriate solution by discussing what caused the delay. While you have every right to inquire about causes for delays, do so in a civil manner.


Lending money to friends can bring both parties into a tricky situation and should be handled cautiously. Consider the borrower’s character and ensure that your loan is repaid in full. Always remain calm, reasonable, and understanding when lending financial support to those in need. Have a written agreement that details payment plan expectations, repayment schedule, and other important terms and conditions. Lastly, never lend your money if it will put your financial stability at risk. By following these simple steps, you can protect yourself from potential financial losses or emotional stresses that may arise from lending money to friends and family.