What to Do When Friends or Family Owe You Money - Quicken Loans Zing BlogWhen a friend or family member comes and asks me for some money, I’m more than happy to help them. I generally don’t think about the process. After all, they’re a friend in need. Is it really necessary for them to sign a contract with me saying they’ll pay it back?

I hate to say it, but sometimes I feel like I should have had my lawyer present to have my friend sign a binding agreement with specific details on when the person in question should pay me back.  I guess I’ve always just given my friends the benefit of the doubt that they’d do the right thing and put paying me back at the top of their priority list, rather than spending their money on junk. I’ve waited years, at times, for friends or family members to pay me back, and I’m pretty sure I still have a few outstanding loans that I won’t collect on.

I try to tell myself it’s just money. I can’t take it with me. If I’m not using it, why not give it to a person in need. No matter what karma-generating idea I come up with to justify handing out my money to needy friends, I get angry after months go by and they still haven’t paid me back. At this point, if I see the person I want to snap and yell, “Hey! I’m not your personal bank you know!”

My Dad always said that loaning money to your friends is a good way to lose them, and I did lose a few over unpaid debts.

If you’re in a situation where a friend or family member owes you money and you’re patience wears thin, make sure to talk with the debtor. Maybe there’s a legitimate reason they haven’t paid you back, or maybe you find out that they can. Regardless, don’t let the debt issue suffocate your relationship.

Once I caught on that talking to someone might help the situation, I worked from there to find out what was going on.  Discuss why they haven’t paid you back.  While you might be like me and want to rant about how you need the money, restrain yourself.  First, find out the other person’s situation. Maybe money is still tight and they just didn’t want to talk about.  Maybe they have the money and forgot. The important thing is to not assume anything.  Just listen.

Then explain to them why it’s important that you start getting the money back and that you want to work together to resolve the issue. My go-to solution is to create a payment plan. If they can get me $10 or $20 a week, it sometimes takes the pain away from paying back hundreds of dollars at one time. Maybe your friend or family member can exchange part of their debt by doing work for you, like mowing your lawn or making you dinner.  Be creative with the solutions you provide.

To avoid this situation all together, make sure you set parameters prior to putting the cash in their hand when your friend or family member asks to borrow money. Tell them when you need the money back and stress this is something to help them get through a tough time. Whether it comes down to actually signing a piece of paper is up to you.

Just as you’re open with your friends and family about non-money related problems, make sure you’re open with them about how you feel when you loan them money. Be diplomatic and understanding but also be firm about your stance.

 

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  1. Oh, there’s a “reason” they haven’t paid me back, and it’s because they view me not as a family member, but as a resource to see how much they can pull out of me. My brother borrowed $4,000 to save his house and that was over two years ago, and there hasn’t been a peep even about making an effort to pay me back. The only thing he’s done is ask for MORE money so he can buy a used $1,200 Mercedes. I told him “you owe me four thousand dollars”, and all he had to say was “So?”. To which I said to him “so you want to owe me FIVE grand, is that it?”. All I get is “STOP BEING CHEAP!!” and “ya BURNT!!”, while he goes to basketball games and buys sneakers. I’m never getting that money back.

    1. Sorry to hear about your experience with your brother. If you have a contract saying he will pay it back, you may be able to take legal action. Good luck!

      1. I have the bank receipts of how much he borrowed, and believe me when I say this, it won’t work. He’ll try to put it back on me by saying “Oh, thanks a lot!!” I let him borrow the money because he was going through a rough spot, and I didn’t want him and his kids to end up on the street. Now he’s divorced and he’s reverting back to some of his old habits, having accumulated, I kid you not, a six foot tall shelf full of sneakers, most likely at over a hundred dollars a pop.

        He’s always liked to “live big” to impress his friends, but he’s never had the money to back up that kind of lifestyle, and he BLOWS money. Things like putting a $800 rims on a on a crappy car, buying a cell phone, and then letting the bill lapse. Even something as trivial just wanting to borrow $20 because he “didn’t feel like” going to the ATM. I really think he has a problem with compulsive spending. At one point a couple years ago he wanted to borrow FIVE GRAND to blow on a 2000 Jaguar S-Type, and I flat out refused. It’s a pattern of behavior with him. When we were younger I had $50 in a drawer and I remember it slowly disappearing, and I was thinking “well, I must have spent it on something”. Then one day remainder of it was gone. I confronted him about it, and he told me he had been slowly pilfering it over the course of a couple of weeks, and then he decided one day he needed it more than I did. At 18 or 19 it might be understandable, but in your 40’s there’s no excuse. He actually did go through with buying the Mercedes, but he sold his van to afford it, and even though I’m the younger brother I advised against it. An old luxury car like that is going to be expensive to repair, and you can’t just let it lapse (like he did neglecting to change the oil in his Dodge Stratus right to the point where the engine seized), and when I dared to suggest he get something more practical like a Toyota Matrix, all he had to say was “screw being practical!”. Even faced with substantial debt he actually said “Yeah, next Spring I’m thinking about buying a new car”. I said “How about next Spring you think about paying me back?”, and he said angrily under his breath “SHUT UP!”.

        He really needs credit counseling, but he doesn’t think he has a problem.

      2. Update: His latest “plan” was to get the guys together and rent the Chase Bridge Skybox for a Knicks game, saying “Oh yeah, we’ll all throw in a hundred dollars a piece, and it will come out to around two grand”. That’s when I told him “Yeah, try more like TEN GRAND, and those boxes are all rented for the season”.

        Is it possible that for some money and debt aren’t real concepts?

  2. well my son owes me so much money. i have been baling him out for y ears. so he got this new job, and yeh ok he has given me a little, and paid the rent once, now he thinks he owns my place, and he was to give me money on last pay fri.. , well he gave his money to a friend, and i got nothing. he owes me 8 months rent, plus 1500.00 i am a single mom, i had to get payday loans to pay off bills, he said he would help .. man i keep giving him the benefit of the doubt. well this MOM is done. i asked him to move, out and he will find out on his own B”ILLS must be paid, or you will have NO place to live, and living with friends dont work… he had a nice home here, meals cooked laundry done house was always clean… so now life sucks for him and seriously i dont care anymore sometimes you just gotta let go let them fall on the face… and maybe one day i will get i am sorry mom for using you and taking you for granted.. just sayin u think u have problems WE all have a STORY

  3. I am the CEO of an online software company called ZimpleMoney.com. We recently published a free booklet called “Lending with a Purpose” designed for people interested in making loans to family and friends and non-profit companies. Please refer your readers to get the free book at our website. Steve

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