Borrowing money from friends

If you find yourself without any money you could consider borrowing money from friends. If you have a bad credit rating, no money in the bank and you need money to pay the rent or even just to pay for groceries it's tough. Borrowing from a friend can be one of the cheapest loans out there.

Personally I have never borrowed more than 50 bucks from a friend at a time. For example when eating out at a restaurant that doesn't accept cards and finding myself with just a little bit of cash in my wallet. I always paid it back within a very short time frame. I do have some experience with borrowing to friends though.

Chronically out of money

Only twice I lent a considerable amount of money to friends. With one person it was clear from the start I wasn't going to be paid back within a short time frame. His wife was pregnant and he didn't have a job or other forms of income. so we decided that he could start paying back when he would start making money again. With an expectation of that happening within a year. After that payment would occur within capabilities. At this point the loan is almost paid back, with regular monthly payments of about 100$.

With my other friend I didn't make clear agreements. He said he would pay me back within 2 weeks. Two weeks later he had stopped his temp job and wasn't able to pay back. We used to hang out regularly, almost weekly. Not since I gave him that money. Two months later he paid back 100 dollar. No clear plan of when and how I'll get the rest of it back.

How to borrow money from a friend

Here's a little checklist:

  • Make agreements about when and how much you're paying back
  • Is your friendship going to be destroyed if you don't pay back the money?
  • What is the money for?
  • How are you going to pay it back?
  • Put down everything on paper

Why borrow money from a friend?

Is it just because you want to buy some booze or even weed to party? Or is it to get you started with a new business? It's good asking yourself if your friendship is worth it. Also, a person lending money to a friend is much more likely to lend money if there are good reasons and if the money will genuinely help someone build a better future for themselves.

A story from London

London is one of the most expensive cities in the world and I worked and studied there for two years. Over half my wages were going on my rent and the tuition fees for my course was £10,000. It was a teacher training course at a private institute and so no government student loan was available. I had to pay it all the tuition fees by myself. Despite having an overdraft of £2000 I still found myself in January of this year in dire straits of how I could afford to pay the next instalment of my school fees which was £1050. My parents were not in a position to able to help me. Money is such a delicate subject. You don’t want to put anyone in an uncomfortable situation by asking and you don’t want to run the risk of ruining a friendship. For many people, it is a question of pride. With the payment of my school fees due in 10 days I wracked my brain, thinking of other people I could ask, who may have that kind of money to spare. Some friends replied that they may have been able to give a few hundred pounds, which I knew would have been at their own sacrifice, given their own financial commitments. And so I pondered more and more on who would be able to help. Then a friend came to mind, who I had known for a few years, who was in a very well paid job and who did not have any children. I wrote him an email to explain my situation and to ask if he would be able to lend me the money. To my relief he said yes and immediately transferred me the funds. We arranged a monthly rate at which I could pay back the money, without any interest rates. I felt a huge weight had been lifted off my shoulders and that I was able to breathe and sleep a little more easily.

My friend lent me the money because he knows I am honest and reliable. He also knew that my financial difficulties had arisen because I was investing in my education and therefore improving the quality of my life.
Having financial difficulties is a very unpleasant and stressful. However this experience brought to my attention just how much my friend cared about me and how much he really believed in me and abilities, and that kind of affirmation is priceless.

My tips for borrowing money from a friend:

  • Evaluate the level of friendship. Is this a friend who won’t feel put out by my request?
  • Be very honest with your friend about what the money is for, how much money you need and when you can realistically pay it back.
  • If you are struggling to pay back the arranged rate of repayment, tell your friend. Your friend is most likely to be understanding and may agree to reduce the repayment rate, whilst your finances pick up.

Transparency is the key. Friendships can end when loaned money is not repaid and the debtor stops all communication. You must always be honest and come clean if you are still having financial difficulties. It is only fair and respectful to your friend who has done you a huge favour by lending you the money in the first place.

Further reading