A friend approaches you and requests you to lend him some money.

What do you do?

As a good friend, you would want to help him. But, at the same time, you would also want to ensure that you don’t lose any money.

The truth is lending money to a friend is often not a good idea. A loan to a friend is usually unsecured, and we shy away from defining clear terms of the agreement. The emotional bond also keeps us from demanding repayment. And all of this can lead to a relationship turning sour.

To ensure that you don’t lose your money or your friendship, here are 5 things to keep in mind when lending money to a friend

• Discuss Other Possible Options: It is very important to discuss other possible sources of money your friend could use. These sources could be formal, like a bank, or informal, like other friends or family members.
  
  If it’s a big amount, you can advise your friend to get a low-interest Personal Loan online, and if the amount is slightly on the smaller end, you can nudge him to borrow the money from his family.
  

• Lend Only As Much As You Can Afford to Lose: If you are lending money with the idea that it will come back to you when you need it, you are making a mistake. We all have seen friendships go sour because of money issues. You lend money to a friend in need or cover their share of expenses and they say they will pay you back, but the money is never really returned to you. Even if your friend promises to give you back every single rupee, you should not put your own financial well being on line for that. You should always make it a point to not lend more than the amount that you can easily let go.
  

• Be Clear About Your Expectations: Discuss all the possible outcomes with your friend and be clear about what you expect. You can also draw a plan or help your friend work on a budget such that he can easily pay you back.
  
  The main thing to remember here is, you need to make your expectations clear. You want the money back in 4 months, make that clear. You want him to pay an interest on the money, be clear about that. If you want to check his behavior with borrowing money so far, feel free to ask him to check the free credit report online. Making your expectations clear will save the both of your from confusion, and misunderstanding.
  

• Don’t Be Afraid to Get Things in Writing: If the amount you are lending is big, you need to safeguard your own interest by getting the deed in writing. This way you will feel safer about giving your friend the money, and your friend will feel more committed to paying it back in time.
  

• Deal With Delayed and Missed Commitments Right Away: You may feel you’re being kind by not reminding your friend that the payment is 30 days past due, but the truth is you might be settling into a bad situation yourself. So, make sure you remind your friend of any delayed payments or missed commitments. This way the both of you will be in the clear. 

We all want to help a friend in need. However, when it comes to finances, it is very important to safeguard your own interest first. If you are unable to lend to your friend, you can help them get instant approval on a Personal Loan application, or suggest other financial solutions.

It might be awkward and difficult to say no to helping a friend. However, you always need to take care of your own hard earned money, and if that means having a difficult discussion with your friend then so be it.