How To Say “No” To Lending Money To Family And Friends


Loans to family members or friends can result in a different set of problems – such as falling out, or tension in the family. This  mainly happens because this kind of lending arrangement tend to be open-ended, where both parties do not set out an agreement on the timeline for repayments or include interest on the loan. You do not know when your money will be returned and this uncertainty can stress you out.

It can be difficult to get the money back from your friend or family member because you worry that you may offend them if you repeatedly ask or remind them about it. Plus, once you have lent money to someone close, he or she may borrow from you again. Before you know it, you are the resident money lender among your friends and family.

It’s all fine and dandy if they return the money to you when they say the would. However, that’s not the case most of the time. Not receiving the repayment on time can leave you in a financial lurch if you are expecting the money for something else. Perhaps, the money could be placed in your contingency fund and if something were to happen to you, having that fund is pretty important. The money could be the difference between keeping your house or having it auctioned off, or it could be the money set aside for your pregnant wife’s hospital delivery bills.

The fact is, few people have completely unused money to be set aside to be lent to someone indefinitely. You too, may face urgent or emergency situations when you will need the money or you could be using that money to make more money. If you lend your friend or family member some money, there is a risk of not getting your money back ever. This could inadvertently affect your relationship with that person forever, causing unnecessary tension and anger between both parties.

If you have ever been asked to lend money to a friend or family member and found it difficult to say “no”, here are some tips on how you can manoeuvre out of the sticky situation:

1. It’s against my policy

You can simply apologise and say that you do not loan money to people. It is just not something you practise because you value the relationship more than money. However, this will require a firm stand especially if the person is desperate for the money.

A more tactful response could be that you do not like collecting debts, and therefore do not give loan out to friends and family. You can also say that you had bad experiences lending money to people in the past and ever since you’ve stopped doing so.

2. I am broke and not in a position to give out loan right now

If you have no money, do not hesitate to say so directly. When you speak to your friend or relative, firmly explain that you are not able to provide him with a loan. This is short and straight to the point and does not give your friend or relative much room to plead.

3. I have plans for my money

Things can be a bit trickier if your friend or relative knows that you do have extra money to spare. In this scenario, you could say that while you have the money right now, you need it for something else. It is important to let them know you need the money soon, to avoid them making promises of returning the money before you even need it.

Stress that the money is or whatever you need to purchase with that money is extremely important to you and you have been planning for this for a long time.  To be more tactful, let them know that you do not want to make them feel guilty in case they delay in returning the money or never return the money in the future.

4. I need money too. Can you lend some to me?

If your friend or relative is always borrowing money, then try switching roles. Tell the person that you have also recently fallen on hard times and need money. This can be an effective way to break your friend of this behaviour.

5. I have invested my money

You can say that you have invested the money and it is not possible to liquidate the money or doing so will result in a loss. Ensure that the investment vehicle you choose to use is one that actually have restrictions in withdrawal, or can cause loss if withdrawn before certain period.

Examples of such investment are fixed deposit account, Private Retirement Scheme (you are not allowed to withdraw unless under certain circumstances), and unit trust funds (in certain circumstances).

Ensuring you always have spare cash invested will pretty much always guarantee that you can use this excuse.

6. I have my own financial limitations as well

Usually, there are some tell-tale signs that your friend or family member is about to ask you for money, such as incessant complaining about their financial situation or woes, over-complimenting you on everything, especially your finances, or even asking for advice on your financial management.

If you sense these signs, you can turn the table around and mirror what they are doing. Whine about your financial commitments, such as school fees for children, travelling expenses, groceries expenses, phone bills, home and car repayment — basically everything you could think of. Tell them how difficult it is to make ends meet and how it sucks your bank accounts dry.

At the end of your non-stop whining, they will believe that you are in a far worse situation than they are and would probably change their mind about asking for a loan. Hopefully, this will prevent them from coming back to you every time they need money.

7. My parents or spouse control my finances

You can tell them that you have left it to your parents to control your finances because you lack the confidence to do so. They only provide you with a monthly allowance and if you require anything beyond that, you would need to go through them. Lending money to friends is definitely not one reason for them to start dishing out the money.

If you are married, you can say that you have joint finances with your spouse and would require their signature to withdraw money. This will get the news across that it’s not easy to get a loan from you.

8. I have lent my money to someone else 

You can tell them that you had some money to spare but had lent it to someone else. Unfortunately, you don’t print bank notes, and do not have that much funds to loan to everyone. You can also add that the individual can only afford to repay you in certain period (make it a long period). To prevent the potential borrower to come knocking again, complain to him about how difficult it is to lend money to people when they don’t return the money, or take a long time to repay. This is the best indirect way to let your friend or family member know that you do not like lending money to people, without offending him or her.

Remember, you have the right to decide what to do with your money. Whether you decide to lend it to someone or not, you shouldn’t feel guilty about it.

However, for most people, they will probably feel guilty after saying “no”, but they need to get past this feeling to successfully reject the loan request. It is never your fault that your friend or relative is in a financial mess, and there is no law that says you must give up your hard-earned cash to help someone else. If you cannot afford to help or do not want to help, you should not feel guilty.

Having tight finances can be a sign of poor financial choices. Find out how you could easily end up being a money fool and how to stop being one!

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