How Can Borrowing Money from Friends Harm Your Friendships?

Photo by Alexander Grey on Unsplash

You can count on your friends for a lot of things – good company, laughs, advice, etc. But there is an invisible line that you may not want to cross: money.

Borrowing money from a friend can lead to more problems than it solves. Here’s why asking them for help should be avoided and why other solutions, like applying for an emergency loan, may be a better choice.

Why You Shouldn’t Borrow Money from Friends

There are many reasons why friends shouldn’t loan money to one another. For starters, there’s the obvious risk that if the borrower fails to pay the loan back, then there could be significant consequences on the relationship.

Even if things go well and the loan is paid back, it can still strain the relationship. Studies show that lenders and borrowers differ in how much oversight of the borrowed money each should have. Feelings about finances and how they are handled, or mishandled are in the eye of the beholder and can cause rifts that can’t always be undone once money has been exchanged. Consider the following:

• The relationship dynamic changes: If a friend asks for or receives financial support from another, the result might be feeling awkward around each other, or even lead to a sense of inferiority from the borrower or superiority by the lender.
• Feelings of resentment or guilt: Emotions can run high when financial matters are at stake. This can cause any number of feelings from both the borrower and lender, such as resentment or guilt, which can lead to changes in the relationship.

Whether the loan arrangement goes well or not, these feelings can cause the relationship to change. The real risk is that the two of you may never look at each other the same way again.

Apply for an Emergency Loan Instead

Why risk the possibility of ruining a good friendship when plenty of lenders are already willing to work with you?

People needing an emergency loan can apply for an unsecured personal loan. With this type of loan, the borrower receives the needed funds without providing collateral (putting something of value down like a vehicle, to secure the loan). Personal loans typically have fixed interest rates and monthly payments and may last anywhere from two to five years.

If your credit score or finances aren’t in the best shape, you can opt for a secured personal loan. These loans require the use of collateral, which provides the lender some security that you’ll repay the loan. But if you don’t, the lender can take the collateral and sell it to try to recoup the money they loaned you. Because the lender has less risk of losing money on a secured loan, they may offer them at lower interest rates and they may be easier to qualify for.

The Bottom Line

Don’t let money come between you and a good friend. Even if the loan is repaid in full, things may never be the same between the two of you. Instead, look for alternative means of borrowing money, like an emergency personal loan from a licensed lender like a bank, finance company, or online lender.

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of havokjournal.com/ or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.