When Grace received a call from Martha, she thought it was the usual hi – hello and girlfriends catching up. Martha seemed to be doing fine, a good job, good car but everyone runs short on cash sometimes. So, when Martha asked Grace for a loan of K20,000.00 payable in a months’ time, Grace did not hesitate after a quick evaluation of whether Martha would be able to pay back, after all, Martha could easily pay back from her salary. The payback should have been six months ago, Martha has not yet paid back the money, it’s stories after stories and sometimes un-answered calls.
When money gets tight, some people figure things out on their own. They solve their own problems and don’t ask others for help. But some people just can’t cope and will ask those around them for a loan.

When it comes to lending money, people who are willing to do it are usually kind. They care about their relationships and believe the person will pay them back on time. They lend out not because they have no use of the money but out of empathy. But often, even when someone is nice and lends out money, and the other person promises to pay it back, they don’t. They don’t pay on time, or they don’t pay at all. Yes, there are way too many people who borrow money and then just refuse to pay it back. They act like they never borrowed it in the first place. And these people might not even be broke. They might be doing just fine and still act this way. They have this entitlement mentality of thinking the lender doesn’t need it back simply because he/she has a good job without knowing the lenders budget or that because they were able to give out a specific amount, then they had no use for it.

People who borrow money and don’t pay it back are frustrating. When people borrow money, they might say when they’ll be able to pay it back, based on their situation. But things might not go according to plan. What they thought would happen, doesn’t. Maybe they lost their job, and their income took a hit. Or their business failed. Or they ran into new problems, and they can’t even think about paying back the loan.

For others, they genuinely want to pay, but they can’t. So, they just don’t. People should stick to their principles. They shouldn’t break promises. But not everyone is strong enough to do that all the time especially when right at the beginning, they don’t say the truth about why they are borrowing or for others, they are simply borrowing to satisfy a certain life-style and usually, such kind of people stop being good people and they become crooks.
But when someone can’t pay back money because they’re truly struggling, they’ll usually be nice about it. They won’t try to dodge you or disappear. They’ll explain the situation and ask for more time. And usually, will make mention right at the beginning that they are going through a rough patch and need help.

Lending money to someone who is family or a friend also means the entire tone of the relationship changes. You’re not just a friend or family member – all of a sudden, you’re a loan officer. There is also a high degree of uncertainty for the lender, because no matter how close you are to someone, you may have no idea how they are with money. In fact, most loans are not paid back as the person borrowing will prioritise all their other bills and expenditures ahead of you. And even then, unless they hear otherwise, they’re going to assume you’re so financially comfortable that you don’t care if you get the money back or not. They will begin to avoid you while you the lender will start to feel resentful as you feel taken advantage of.

Lending a loved one money can breed resentment, because people don’t often get paid back. For a more substantial loan, the number one thing is, give yourself time to think about it and consult with your partner, family members or anyone else sharing your financial decisions. If you don’t have a written contract, set up a payment plan with specific deadlines and even float the idea of charging them interest – though maybe not as much as the bank or what a kaloba person will charge. No matter the dynamic, clearly if your friend has a problematic past with money, you want to be careful you’re not financially enabling anybody especially if they have a pattern of chronic financial mismanagement. And never ever lend out cash as there will be no trace to show the trail of money. Also, try to ask around from reliable friends or family members or the capability of the borrower to pay back. It might just save your relationship and money if you got to know the true standing of the person wanting to borrow money. Maybe he/she has borrowed from the entire clan or from all your former college mates or they have a gambling problem or maybe they genuinely have just fallen into hard times.

If someone is generally responsible and has a full-time job, but suddenly faces a medical emergency, a burned-down house or something similar – and they need support, giving them money, with no expectation that they pay you back is not a bad idea if you are able too. When you borrow from someone you’re close to, typically no one signs a contract. You probably won’t discuss the repayment terms other than having a vague ‘repay me when you’re back on your feet’ type of agreement, but that doesn’t mean this debt has no risks.

If you don’t agree upfront on exactly how and when the money will be repaid, it’s easy to feel there’s no urgency to repay it. But the person you borrowed from may have a different level of urgency from you about the repayment. Not communicating this from the outset could lead to heated disagreement.

Make sure both of you agree exactly how and when the money will be repaid. And if your friend or family member says, ‘Repay me when you have the money’, make sure you double-check they really mean that. It might be a long time before you’re able to pay them back and you don’t want to argue with them about it later.

When you sign a contract with a commercial creditor, it’s all but set in stone. You know what’s going to be expected of you and how you’re expected to do it. Unfortunately, when you enter an informal agreement with a friend or family member, things change. Maybe your friend’s spouse or child has had an emergency and the money needs to be paid back straight away. There are plenty of ways to manage when a commercial lender makes an unfair demand, but if you take the same tactic of asserting your rights with a friend or family member, you’re likely to strain your relationship with them. Make sure you agree upfront that this shouldn’t happen. When you borrow money from someone you know, they become the creditor and you become the debtor. You owe them – literally. This can change the dynamic of your relationship with them.

Furthermore, while there’s a straightforward process commercial lenders must go through to help you if you can’t make a repayment on time, friends and family are under no such obligation. Not making a repayment on time may make them resent you and wish they hadn’t lent you the money.

Consider carefully how you’ll manage a relationship where there’s a constant awareness that you’re in debt to that person. Many relationships have ended over the issue of money. It’s easy to assume that just because there’s no written contract, borrowing money from a friend or family member is safer than borrowing money from a creditor. In actual fact, borrowing money is considered a type of verbal agreement and has the same legal standing as many other types of debts. Your friend or family member can still take you to court to enforce the debt if you don’t pay it.

If you come to an agreement and borrow money from a friend or family, stick to that agreement. Don’t make promises to repay amounts that you can’t afford. Set up a schedule of repayments so that you both know when repayments will be made. And should you find yourself struggling to make repayments, be upfront and ask if you can pay smaller amounts or temporarily stop paying until you’re in a better financial situation. Taking advantage of family or friends when they lend you money and you choose to not make effort to pay back only tarnishes your name. People talk and they will discuss your untrustworthiness when it comes to paying back and not only are you blocking yourself from future help but you are blocking all other friends and family who might be in serious need as the lender will not easily give out money to family or friends when they remember how untrustworthy a friend or family member has been in the past.

A friend who lends you money in times of need without even questioning you why you need the money should not have to explain themselves why they need it back when it is over-due. Have the courtesy and decency to pay back when you borrow from friends and family to maintain peace and credibility. And when you know you are in no position to pay back, ask for any assistance and not borrowing, when you clearly know you have no capacity to pay back.

Seek help when in need, visit a Counsellor near you!