Have You Ever Loaned to a Friend? | Personal Finance & Lifestyle | Yakezie Forums

Say no… Run run run. 

Look.  You feel like you owe the guy one, I understand that.  But, let's be pessimistic here and say that there's a 50/50 chance of him defaulting on the loan and you having to pay it off to CYA on your credit score.  Can you do that?  Can you do it without it ruining your friendship? 

I've loaned money to friends many times.  But, generally in amounts of less than $100, and each time, I was glad to have it back, IF it came back.  If it didn't come back?  Well, it wasn't an amount I couldn't lose, so it was always better to forget the loan than forget the friend.  The only time I loaned an amount over $100, was about $300 to help a friend buy an engagement ring for his girlfriend.  (She said yes.)  I know that he had every intention of paying the loan back, and probably would have.  But, instead of getting them a present for their wedding, I forgave the loan. 

We've all been there, and we've all done that.  Some have had it go terribly wrong.  In those cases, you sometimes have to wonder about the friends those people keep in the first place.  I'm sure your friend will attempt to pay back the loan, and will if he can.  But, the key point is, what if he can't?  What if he loses his job or whatever and can't pay back the loan.  Your credit will be on the line if that loan goes into default.  You'll either have to pay it off, or take the hit to your credit. 

My tip would be don't do it. If you want to help him out, give him the money or offer to look at his finances with him.

I once let a friend buy a truck from me on a payment plan.  I'm glad I had a proper loan agreement, because after he quit talking to me, moved out of state for a year, then moved back, I got to play repo man.

I then sold the truck to a much closer friend of mine, also on a payment plan.  He doesn't pay regularly, but he does pay.  He's my closest friend and he needed the truck more than I needed the money, so my wife and I agreed that, if he couldn't pay, we wouldn't care.

I would say don't do it.

I agree with those who have said not to do it. I cosigned a loan for my parents & at various times they have failed to pay it and it really puts a strain on the relationship. I would recommend only cosigning a loan if you alone could comfortably make the loan payments if your friend bails on them. Also think about how you will feel towards you friend if they stick you with paying the loan back.

Thanks everyone for the reply.  I doubted the idea from the start, but I thought I should ask Yakezie for some advice and to spark a conversation.  My friend is not in a desperate situation, he just would like to lower his interest rates.  But still, I think the loan will be more trouble than it is worth, and may strain our relationship.  

I also thought about how successful I have been in lowering my own student loan debt, and I would not want to take on any additional debt/risk.  I still have a negative net worth when I factor in my student loans, so I am in no position to risk my money.  I'm going to tell him no.

Has anyone had success with lending to a friend?  Jason, it sounds like you were OK with your close friend paying you, but you had to Repo the truck from your other friend.  That sounds like a hassle, and it is something I would never want to do.

I'd loan a small amount < $500 only if it is a real "need". Otherwise, say no.

After College Money said:.

Has anyone had success with lending to a friend? 

I had two loans to friends that were paid back in full with no hassle.  Both were for relatively small amounts if I recall (probably less than $200). 

Don't do it! Lending friends money, or cosigning loans for friends – it is just never a good idea.