What is your advice for lending money to friends and family? (2023)

Borrowing money from the people you love can be difficult, so it's no surprise that Debt.com readers have asked many questions on the subject. Whether it's a friend who needs help with debt or a teenager who needs to start a business, the decision to get a relationship loan is never easy. Here are four questions - and expert answers - about lending to your loved ones.

What kind of people should I lend money to?

Questions: Speaking of the perfect storm, my boyfriend and best friend want me to lend them money! I have the money to comfortably help one, but both will eat up my savings. I'd rather just borrow one, but can't decide. My boyfriend wants less ($2,000 to pay off his high-yield credit cards), while my best friend wants more ($3,000 to buy a used car after his 1999 Corolla finally died).

Here's my problem: My boyfriend really isn't good with money, but my best friend is. My friend uses a credit card to buy drinks for all his friends at a bar while my best friend eats ramen noodles to survive. Both were laid off last year and are struggling with low-paying jobs. What should I do? My parents don't help with such questions because they say, "Never lend to your friends." What are you saying?

– Erica no Tennessee

Howard Dvorkin CPA Answer...

I hate criticizing your parents, but I have to do this.

Of course, lending money should be done with care. However, I distrust the wordNever. I prefer to make financial decisions based on facts rather than arbitrary rules. As I wrote in my second bookLuz…

what should one do

While I believe borrowing from friends can be helpful, I'm also cautious. I have one rule: if I'm lending money to help a financially responsible friend get through an emergency, I'll keep my arms and wallet open. However, if a friend mismanages their money, I refuse, not out of arrogance or anger, but out of concern.

A loan in this case will only mask bad spending habits. You're not solving a problem, you're just delaying an inevitable billing.

Also, I don't believe in ruining yourself to help others. There are often other solutions. In your friend's case, he has a common problem I've seen a lot: credit card debt. Stop before you borrow moneyDebt.com beware: tell them to call one of our certified loan advisors.You will receive a free debt analysis that can lead to a debt relief plan.

As for your best friend, if you follow the advice in my answer to the next question, you'll be fine Erica. More importantly, I'm worried about your boyfriend. Are you thinking of getting married? If so, I can't encourage you enough to sit down and have a heart-to-heart conversation about money. You'd be surprised how many couples get married without knowing enough about their spouse's spending habits. You do not believe me? Check out these......Fascinating facts.

Should I pay off my best friend's credit card debt?

Questions:My mother died and I inherited $20,000. Fortunately, I have no debt other than my mortgage. I didn't go to college, but I started my own hair salon, which is doing well enough to pay off my credit cards every month and even save a bit for the bad times.

So here's the catch. My best friend since high school is an amazing woman. He studied law and now works as a prosecutor who puts bad guys in prison. In fact, he makes more than me, but he has big student loans. She also has $10,000 on her credit cards. He asked me to pay off those credit cards and he would pay me $500 a month. You would use the interest savings to pay off your student loans.

Should I do that? She's my best friend, but I'm uncomfortable.

– Paula in New Hampshire

Howard Dvorkin CPA Answer...

You feel "restless" for a reason, Paula. This is because you are in a difficult position.

If you don't lend your girlfriend the money, she will be hurt or angry or both. This can cause a rift in a long-term relationship. However, if you lend her the money and she doesn't pay you back,you will do itbeing hurt or angry or both, which could also jeopardize your friendship.

questions before money

Before you write the check, Paula, ask your friends some tough questions. Don't borrow money until you get honest answers...

• How did you get into that credit card debt?There's a big difference between a one-time emergency (like an illness) and regular visits to malls.
• Do you have any other debts I don't know about? student loansYou're repressive enough, but you need to know if your friend has a car loan, mortgage, or other debt.
• Can you control your spending?Is your friend good with money? If not, your loan won't solve a problem. It only delays a disaster.

If you're still "uncomfortable" with any of the answers, don't borrow the money. Instead, make the following recommendations...

less dangerous options

I have always believed that personal loans should be the last resort. They should only be considered after all other options have been explored. Your friend has a pair.

she can pull onePersonal loans for debt consolidation, and you can get this loan with favorable terms through Debt.com.take out a loanProgram. Sure, you'll pay interest on this loan, but you'll save a lot more than if you kept paying the higher interest rates on your credit card.

Your best (and cheapest) option is to make a toll-free call to one of Debt.com's Certified Loan Advisers at, where you can get a free debt analysis. Until she at least makes that toll-free call and explores her options, I'd put her friend off because there might be a better way, Paula.

How can I convince my child to lend me money?

Questions:I bet you don't get many questions like this, Mr. Dworkin. How do I persuade my stubborn son to accept my donation for his new pool cleaning service?

There are many pools here in Florida, all of which need regular cleaning. Of course there is a lot of competition between these cleaning services and my 18 year old son worked for several from a young age. Now, while she is in her freshman year of high school, she wants to see if she can start her own business.

(Video) 6 Reasons Why You Should NEVER Lend Money.

I offered him $2000 to buy the equipment which can cost a lot of money. I told him he didn't have to pay me back, no strings attached. He said no, he doesn't want help. So not only does he go to school, he works nights to save for the team.

So please tell me how to make him change his mind!

— Eleanorin Florida

Howard Dvorkin CPA Answer...

After more than two decades as a chartered accountant and financial advisor, I have learned that money is not only a financial instrument but also an emotional state.

Financially, your son is a fool if he refuses a $2,000 donation to his new business. Emotionally, he wants to do it alone. While this may frustrate you, I strongly believe that you should be proud of your decision: you raised a child who doesn't want handouts. I've found in my own career that entrepreneurs with this trait end up being the most successful in life.

However, I can suggest a middle ground.

Of course, your child does not want a donation, but how about a loan or an investment? When you charge interest, you may see your money as a business transaction rather than an unmerited gift. Find out together about the current lending rates for small businesses. You could offer him something similar. Agree on the loan rate and term so you know you're not giving them a "family discount."

Another option is to invest in your company as a silent partner. You could negotiate the terms with him. I suggest you and your child searchyouth successand find the branch closest to you. JA has taught millions of young people how to start and run a business and as a Florida resident I know there are many offices throughout the state.

In short, Eleanor, be proud of your son and realize that the rest of what we're talking about is the details.

Should I lend my child money to take a business risk?

Questions:I read the strange question you received last month from a mother whose child wouldn't take her money. He wanted to start a pool cleaning company on his own and without help. Well I have the opposite problem.

My 16 year old daughter wants me to lend her $500 to open a handmade jewelry business. Luckily I have the cash and no credit card debt. (I took your advice and asked for help a few years ago.) So I'm not worried about losing money. I worry that my daughter will be so discouraged when she fails that she won't appreciate the value for money.

What should I do?

– Amandain Idaho

(Video) Why You Should Never Loan Money To Family - Dave Ramsey Rant

Howard Dvorkin CPA Answer...

If I understand your concern, you think your daughter will lose the money and not feel the pain she deserves because it wasn't her own. I think you're kind of right.

The best way to teach our kids real life lessons about money? Let them make the money, and then let them lose the money.

So in your case I would give your daughter housework or other work so that she can quickly earn the 500€ jewelry, the pain stays with her.

In fact, I think your daughter wins whether she succeeds or not, and so do you.

Let's say you sell enough jewelry to not only recoup your initial $500 investment, but also make enough to spend on entertainment, shopping, or whatever else you like. You may find this frivolous, but it can also be educational.

When your daughter is wasting money trying to impress her friends, you can help her see the futility of it. You might also encourage them to save for college, a car, or another purchase that involves delayed gratification.

Well, what if it fails terribly?

For $500 you taught your daughter thatMany successful people fail. What made them successful was getting back up after they were knocked down. As you can see from what I've written here and elsewhere, a large part of success doesn't depend on what you have in your wallet. It is what you think.