POSTED BY May 12, 2014 COMMENTS (75)ON
In past have you ever extended any kind of financial support to some friend or relative and now you are unable to recover the money that you gave? You may have tried hard to get your money back but instead of money you only receive (false/genuine) promises in return. Imagine of a situation where your close relative or friend is in real need of money, they place you in a position where you just can’t say NO to them. And out of your goodness you end up lending money to that person.
The important questions that one needs to ponder are; you should lend money to friends and relatives or NOT? What to do when people don’t return money on time? What to do when the situation is highly emotional and it is hard to say NO? One should get totally practical or not? Do you earn to help others or you earn for your own financial well-being? What if some people want to take undue advantage of your strong financial position and they act needy all the time?
Wednesday Brainstorming Question
How many of you have given money to some friend or relative and you are now afraid to ask for your own money? – Let’s brainstorm on what really STOPS people in asking for their own money also let’s discuss how one can initiate such recovery conversation. Giving money is one part of the story what about the other part which is about recovering your money (With or without interest)
To create wealth one has to be a good receiver and not just a good GIVER. If you are only good at GIVING it just does not work. We want you to call-up your friend or relative and initiate money recovery conversation, here in such issues it is NOT about money, it is always about your relationship with money.
We would also love to hear experiences from those who are willing to ask for their own money. (We want this group to recover all such blocked money)
PS: In case you have taken money from someone we invite to have conversation about returning that money. Don’t wait for other person to come and ask. This is how you master your relationship with money and people.
Amazing Reply by Arnab Mitra
We received some amazing sharing and experiences from all our participants. All the experiences shared were amazing but a few points raised by Arnab Mitra (who is also the co-author today with us on this article). He encouraged us to write this article.
Here is the reply by Arnab
Under certain circumstances and situational basis, people lend money to relatives, friends, sometimes to the circle of your labors. Earlier I saw my parent’s situation of how they struggled to reclaim loaned money from their blood relations ( YES indeed ..) . And now, I am no exception either. I have already lent a relative and a servant significant amount of money. I understood their requirements, and as I mentioned – situational bias obliged me to lend. However, the position/response of reclaiming the amount back is not satisfactory. I am able to recover recurring partial payment from 2nd person ( who is not a relative ) from his monthly wages , but recovering the significant amount of money loaned to my relative is quite away.
Several phone calls/reminders didn’t seem to work. Interestingly, the relationship is so close that I didn’t think about to inform my family. But, few months ago, as I was indeed worried whether I would get my money back, I had to inform my close ones. It was very very embarrassing situation for me as well as for my close ones to discuss on lending. I have received a part payment but – certainly there is imbalance in that relationship. There are few more such instances I have mentioned below.
My leanings from the above
1. Forget about relationship (obviously if it’s within your own family) when money comes in between you and distant relatives. Controlling emotional thrust is what I have learnt can zip your wallet.
2. It is all about your hard earned money – it’s not for donation.
3. How small the amount is – if you loan to someone – go chase it. Let me share similar fact – I gave Rs. 500 to worker, who runs a tiny store next to our apartment complex to iron people’ apparels. I made sure I recovered that through enough number of apparels without paying to recover the amount. May be people think – what the hack – just for Rs. 500 – but that is what circumstances taught me.
4. Another one – I loaned Rs. 3K to a known person as he is about to setup a homeopathy dispensary. That guys requested amount from all of the families in our apartment complex. What we did, we kept a diary of record of money loaned by each lender and got it signed by us and that person. We will recover a monthly amount from him once, the dispensary is fully functional.
5. The above steps seem to show selfishness, but those have changed my behavior of lending money ( even though if its Rs. 100 ) , and to become selfish.
Let me also share the exact snapshot from our bootcamp page, so that you get the feel !
1. Give space to NO
There are so many people who end up lending money just because they are not able to say NO. How will it look? Is the question that clouds their head and they are not able to say no in that crucial moment. Now, we also have category of people who very well know that they should learn to say NO but still they end up saying yes. Your “yes” turns expensive when you are hold a NO in your mind.
I was once participating in a seminar where I was taught that 99% of people are victim of ‘looking good factor’, when in front of people they either try to look good or they are busy trying to avoid looking bad. In some situation saying NO serves you better and so learn to say NO when you are not in a mood of lending money to someone.
2. Create Clear agreement
While lending money people are aligned with each other but what about agreement. Alignment is internal chemistry between two people whereas agreement is something which happens in the external world. When it comes to lending money along with good alignment one needs to create clear agreement with each other. Creating clear agreement is about agreeing to something which leads to mutual understanding of things.
Here is how you create an agreement – “I am giving you x amount for x purpose and you agree to return full amount with/without interest by so and so date”. When you create clear agreement there is very little space for expectations to breed. People who fail at creating clear agreement while lending money always get disappointed by expectations that they set for the other person.
3. First check your Capacity to lend
You may have money to give someone but do you have the capacity? Once your basics are in place and after making all the investments for your goals if you are left with surplus money, it shows you have extra capacity to lend. A lot of people miss out on this point, their decisions are driven by their emotions and they do not take decision to lend money based on their capacity. One should lend only when one has the capacity to lend and not otherwise because such casual lending will have direct negative impact on your financial life and future.
4. Prepare a legal document or take something in writing
This point according to me is the most important point to consider while lending money to someone. Adding the legal dimension sometimes checks the genuineness of the person who is asking for financial help. If the person is clear he is going to return the money he/she wont hesitate for such legal documentation. Also in many cases it has happened that instead of returning money, the borrower claims money from the family of lender. (In case of sudden death of lender). Such confusions and complexities can be avoided with the help of legal documentation or by taking things in writing.
5. Mechanism of Reminders
Most people fail to set-up mechanism of reminders. While lending money both the lender and borrower can decide upon weekly, monthly or bimonthly reminders. You can set auto reminders on your google calendar or by email,sms or by calling each other at regular intervals. It is important to stay in communication because once the channel of communication breaks it becomes difficult to recover your money after some time.
6. Habitual Behavior
If more than 3 to 5 people have not returned your money so far it means you haven’t yet got in touch with your habitual behavior. May be you give money and then wait for the other person to return money on its own. Lending money is not bad but such habitual behavior can keep you away from your own money. A lot of people stop lending money after one or two bad experiences because they feel they are now wounded. Instead of stopping to help people financially why not examine your habitual behavior that prevails in your relationship with money.
7. Check what’s behind the curtain
A friend of mine approached me once for money. I asked him why he wants money and he said, “I want to pay salary to my employees and so I am in need of money”. I immediately told him money is not your problem, poor cash-flow management is your real problem and so let’s fix that so that you never find yourself in such situation. People who borrow money always see money as ultimate solution to their problem, but as a lender you have to check what’s hiding behind the curtain. I personally feel that providing such powerful guidance is much more powerful than just lending money.
If you have given money to someone we invite you to initiate fresh set of conversation with that person and share your experience with us on the blog. Also, if you are someone who needs to return money to someone, pick up the phone and bring clarity with that person. We have used the word debate in the title because to lend or not to lend is a personal choice. Lending is not bad; asking for your own money is not pressurizing. The intention behind this article is to make you aware before you lend money to someone so that you do not become victim lender.
Work on your financial life with our Online Facebook Bootcamp Support
Lastly, our 7th Batch of boot camp is starting from 19th of May, if you want to learn from other committed group of investors and want to jump start your new journey as an investor, don’t miss to participate in our upcoming boot camp. (We want to sell this program to every investor on this planet)
This article is written by Nandish Desai along with Arnab Mitra. The Co-author of this article is Arnab Mitra who is based out of Kolkata; he works as IT Technology Consultant at Cognizant Technology Solutions Ltd (CTS).
Please share your inputs and your experiences about lending to friends and relatives in comments section please.
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75 replies on this article “The BIG Debate – One should Lend money to relatives and friends or NOT?”
I agree with Mr Ramesh Kumar!! I have myself borrowed money in emergency situations only when I did not have enough money in my purse when some situations suddenly popped up. And I have returned it back gracefully at my earliest with profuse gratitude….!
If only the whole world was like me…. (laugh); then you wouldn’t be writing this article!!!
But sadly & frankly there are too many shameless people on this earth. They are real friends only until they borrow money from you. While taking the money, they will profusely promise you of returning it back ” soon”!
Finish!!! Dat’s the end of your money & your friendship… Initially immediate after the borrowing they are very sweet to you, but as time passes they slowly distance themselves from you…..
Manish, in your conclusion you say if you are the one to having to return money to someone, then pick up the phone n bring clarity with that person!
Please tell me in reality how often this happens?! There are another kind of our human species, who don’t start avoiding you! But they still are your good friends!! Not only that, they become so close to you that you are embarrassed to ask them about your own money & even if u managed to ask them hesitatingly (afraid u might hurt their sentiments!!), they convince you that soon or the next day they will return your money to you!!
But alas! You are destined to never to see your money again…
You end up frustrated n angry at yourself n the borrower is simply blissful….
Yet to find another “bakra”…..
Yea there are no enough people like that , hence the suggestion 🙂
I have been on both ends of the spectrum.
Having donated money to close relative, despite having a gut feeling that he will splurge it. I had a clear expectation on when it would be paid back. He didn’t honour it and I would call him every other day, till he paid. The relationship is spoilt, but that’s what money does to relationships..
Having taken money from sibling. Had a clear understanding as to when and how I would pay back and am honouring it. But, it gets nasty when parents start taking sides. Reminding you about the monetary help. It gets to one’s nerves. But, one has to see through all this. I have taken money, in hindsight I might feel I could have lived without it, but still I have taken the money and hence have to repay it back, as promised. If gratitude is expected, it has to be extended. One strong learning for self, never take money from relatives. Borrow it from a bank, better postpone the need till one has money. But don’t borrow from relatives or friends. One will only spoil one’s relationship.
Thanks for sharing that experience .. it was a nice read !
I would like to recommond everybody must read the book DONOT SAY YES WHEN YOU WANT TO SAY NO written by Herbert Fensterheim.He is behaviour expert. Saying No for Loan to your relatives /friends is hard.But if you are not comfortable.say NO.Mr Herb Has suggested how you should be assertive in life by saying NO.He has given various ways to say NO like…I WISH I COULD HELP YOU BUT I CANNOT BECAUSE…………….
My personal experiance with lending money taught me following lessions
1)The person who is asking for loan is a desparate person,a person without oxegen.So he is not asking for loan but his desparation compells,propels him to
ask for loan to achieve HIS TARGET.Once you have given him/her loan(Oxegen)
he will again go to his comfort Zone. It has even occured to our gods like Lord Ram when helped Bali so that he will help finding Sita but instead when HIS GOAL was achieved he went into COMFORT ZONEand started enjoying the life and FORGOT the committment to Ram.It is only after Luxmans’ STERN FOLLOW UP he started to acheive LORD RAM’S GOAL.
Even our Great father of nation Mahatma gandhi could not judge a lady who was running a small hotel in south africa asked for a loan to Gandhiji at that time an advocate with surplus money ,without looking at her money managing ability gandhiji lended her big money and LOST without return.
2)PAY YOURSELF FIRST…..so that you will not have any surplus left .In this case it is easy to say NO
3)If you want to lend money ,lend only the amount you are COMFORTABLE in your mind that the money will not come back.
4)An unorganized person disturbs and try to unorganize an ORGANIZED person so instead giving him money give him MANISH CHAUHANS BOOKS as GIFT
Thanks for sharing that 🙂
I want to share my bit of stupidity. Couple of years back through one of the social networking sites i got in touch with a girl and it turned out there was a common fauji connect as my dad had served under her dad. That was a trust building factor for me which was enough for me to be convinced to loan her money ( a year later of our friendship ). Over the months i ended up giving her 1L . Some time later she just went underground and her cell was always answered by her mom who was apparently very upset with her. At least her old mom was able to return 30,000 but unfortunately i lost my cell and all contacts were gone. The girl has deleted all traces of online presence , emails. Its been few years now and she has been untraceable. Her Mom has not contacted me till date
Incident2: As if the learning was not enough , i again lent 7 grands to a friend of mine. Here the trust factor was his preachy talks on religion which led me to believe he was a man of words and integrity but alas i was proven wrong again. I was promised that money would be returned within 2 months but all efforts at hinting failed. Its funny how the borrowers can come with so many innovative reasons to not pay back. This person would claim lack of job or sometime his relative is hospitalised etc . For the first incident the most funny alibi i got was that i was going to deposit cash in your account when a bomb blast took place ( gauwahati) and she happened to be at the spot..she had to use the money for her treatment 😛
Anyways the lesson i have learnt is its always better to come up with a polite refusal rather then spoil your health later on followups. Money always spoils relations . I have so many similar examples from my friends who continue to regret like me.
Thanks for sharing that 🙂 .. it will help many people !
Thanks for sharing that Arun 🙂 Control yourself next time I would say 🙂
Most of the comments here are from the lenders, let me share my experience on being a borrower.
Few years back, I took 1 lakh each from 3 different people as I had to pay down payment for the home I was buying. There was a shortfall of 3lakh and not a single person was able to give me 3 lakh in one go. I approached few of my relatives and some how managed to get 1 lakh each from 3 relatives.
Since all were very close, neither of them asked me to give a definite time period to return the money, not they asked for any interest. For me it became all the more important to return their money fast as they are not taking interest.
With that thought in mind, I tried my best and could repay all of them in about a year’s time, though the amount of 1 lakh was paid in 3-4 installment to each of them.
Thats great thing Ashish 🙂
Not all experiences are always bad. I lent 10L rs to my cousin for a year who wanted to expand his business. He specifically asked for a check payment and said that he will give me 9% interest rate (same as bank FD at the time).
I did not bring up the loan with him later. Just before one year ended, he transferred the amount plus 9% interest to my bank account. Sent me a form 16. When I spoke to him later, he told me that from teh day he took the loan, he started a RD of 3000 rs a day which the bank sent someone to collect from his shop. At the end of the year, he had the amount to be repaid and since the RD was daily it was not a strain on him to accumulate the money in one go.
Great to hear a positive experience. I have to say your case is very rare and only because your cousin has a conscience and is a sincere bloke, you got your money back.
In most cases if you lend a relative 10L you will see very little of it ever again because the majority do not have any conscience and think of relative’s money as freebie or at best interest free loan. That’s why they didn’t go to the bank for the loan in the first place.
Thats great ! .. I agree that not all people have such a bad experience as mentioned in article, but those are rare cases !
very important topic in day today life ,
what i have learned in lending the money to relatives and friends like every body said
1. EXACTLY KNOW THE SITUATION LET THEM COME AGAIN TO YOU AND HAVE A CROSS CHECK
2. TAKE SOME TIME AND TRY TO AVOID GIVING THE FULL AMOUNT IF THE PERSON WILLING TO TAKE WHAT EVER YOU ARE WILLING THEN THINK TWICE
3. LET SOME IMPORTANT PERSONS KNOWN TO EACH OTHER MAY PRESENT AT THE TIME OF BORROWING
4. FINALLY YOU ARE THE BEST JUDGE TO THAT PARTICULAR SITUATION AND TO THAT PARTICULAR PERSON IF YOUR LENDING MONEY HELPS ANDY BODY HOME OR LIFE OR CAREER LET IT GO YOU HAVE THAT SATISFACTION,,,,,,,,,,,,,,,,,,,,,,,,,,
Thanks for sharing your view Prakash !
An article well written! I feel that its the primary responsibility of the person who borrowed money to return it. But sadly , that is not the case these days. Just to quote an example , i borrowed 3 lakhs from my father for a personal need of mine and many people might think that if you borrow from your parents, there is no urgency in returning the money to them. But thats not the case. Maybe our parents are in more need of that money but they will never let us know about that. So prepared a payment schedule to return the money back to my father and that too along with a 10% interest, so that he doesnt lose out on that amount which he would have got had he invested the same amount elsewhere.
Salute to you, Priya!
Thanks Anand . This is the least which I could have done for my parents and wish that every child thinks in this manner.
So inspiring Priya. Convey our regards to your parents.
Priya, what you are doing is a great thing but my philosophy is a bit different. I don’t believe in treating my parents like a banker. I recently borrowed some money from my parents but instead of paying interest, I am paying all the utility bills like Electricity, Internet, Mobile and Cable DTH etc. on their behalf.
At the end of the day, we are family and my parents believe that their money is my money and my money is theirs. Its all about helping each other out.
Anjan, Lets give each other space and freedom when it comes to returning money to our parents. Everyone’s approach is going to be different and it is special in its own way.
I want to share my experience. I gave a soft loan to my friend as he lost his job and he needed some money to clear off his EMIs.. I know him for decade, so I helped him with the finances. He did not get regular job for one year thereafter and I could not ask him to return the money. I always reminded him that he owes money to me and he always confirmed this. One month back as he has now regular job I asked him to return my money; to this he asked what is the account. I gave him account of money taken by him in 100s and and 1000s. The money owed by him came to Rs.8,000/-. On this i calculated interest 4% per month, which I have been paying to my bank for non-payment of my credit card payments. I told him that because I expected that I would get my money back from him, I used my credit card; and now when he did not pay my money, with the result I could not pay my credit card payments and banks charged 3.5% interest and service tax thereon , thus around 4% per month interest. I told him that I had expected him to return money 6 months back, so I added interest @ 4% per month for last six months only and not for whole year. Now my friend understood that he will not enjoy my money without paying interest on it and now since he has good job, he agreed to return my money in three installments.
Thus using common sense i made him realise that money has interest earning capacity.
Thanks for sharing your experience of lending money to close one !
My parents (mostly my dad) have been the biggest victims of money lending all their life. I don’t want to discuss the exact amount but the amount of money lent by him to various people combined easily run into several lacs. The people he lent money to not only includes blood relatives but also non-relatives and sometimes people who are more or less strangers.
It’s not like my parents ever had surplus money to keep lending away but their inability to say “No” to anyone has cost them dearly. They always thought atleast blood relatives would return the money on their own without having to ask for it but unfortunately that wasn’t to be and now it’s practically too late to ask for it. He did it once but they have severed all ties with him since.
Now they are in a position where they have almost reached retirement age and there is very little savings left in the coffers. I think this is a big lesson for people to never lend money to relatives and friends for no reason whatsoever. Money destroys relationships! Most important thing to remember is to only lend what you are able to “write off” because more often than not expecting the money to be returned just gives you false hope.
The concept of legal documentation as suggested in this article is very hard to implement in the real world with relatives. I think we all know how it is with brothers and sisters. We can’t treat them the way bankers treat us while giving loans.
One thing I have seen in many cases is that its much easier to preserve a relationship with a relative if you’re able to make up some excuse and say “No” than if you try to recover money lent to him/her in future. So in many ways, point No. 1 in your article could be the most relevant point of all.
Anyway, nice debate going on here. It’s a very touchy subject indeed and hopefully more and more people will come forward and comment here on their experience and we can all learn something on ways to deal with this menace.
Thanks for sharing your case . I agree with you that its much easier to keep relationship by not lending with an excuse rather than lending and trying to recover .
Your article is really nice.
Please discuss what action we can take If someone is not returning money norther answer the call. I land 2L to my friend, now he has stopped answering call and he promised to return in a month now it’s been years and half he hasn’t returned single rupee.
Please tell any legal cource of action.
I also have had a good friend like yours. Though the amount was small Rs.25,000/-; but 10 years back 25k was not so small amount.
You may take lessons from such mistake… By-the-way if you have any proof that he owed you Rs.2L only then you can taken legal recourse, otherwise this is the price of learning this lesson.
Don’t trust everybody..
Dear Sir ,
I transferred the money online bank account statement is the proof .
Please let me know if i can use it as proof .
Yes, its a proof !
You can now file a police complaint for this .Make sure you are ready with the proof of lending .
There is no proof as lending contract or any thing of that short .
Money was transferred online and that only proof I have
Please let me know any step can be taking against him on not.
Thats a legal proof , but you cant prove that its a loan, one can always say that they got payment for something !
Please Guide the course of Action to be taken.
What all I need to get back Money.
You first have to prove that it was a loan , file a complaint with police on this and pursue the case !
I also want to share an incident recently happening with my father.
three years ago My father gave 5 lakhs to a relative for helping in purchasing a property of rs 15 lakhs.
They said that they will return the money as quick as possible becoZ they also have some lendings pending and as they recover they will return back to us.
After that til one year no money return happen.
After two years my father was in need of money for marriage of my older brother.
So we prezzurize them for money.
They said they are selling their house and will return the money.
One thing I forget to tell u that in 15 lakh half money was on loan. That means 8 own + 8 loan and out of which 5 was from us.
And their income is only 20000 per month so they were not able to pay the interest of 2% on 3 lakhs.
In total After 3 years from initial date…. no money was returned by them.
Some months before…. relatives after so much pressure make a deal to sell the plot in maket for 33 lakhs.
And from token money they returned 2lakhs. After two months on finalisation Of deal they returned the money of 3 lakhs.
That means no interest was paid and when asked for interest they said they wanna buy a new property and will pay later the amt of int.
Amt of int is now 5*.02rate*36months=3.6lakhs
And if my father was a partner in that house then one third of property belongs to us I.e.11 lakhs from 33lakhs sale price that means 6 lakhs extra.
Conclusion is simple…. we become fool by lending the money and relatives used our money, invested, and now having a large amt of return.
And we still dont have the 3.6 lakhs of interest also.
Of all the people who could have lost money by lending to relatives, you deserved it. How can you charge 2% interest per month, thats 24% per annum without compounding!!
A lender can charge whatever interest he so desires. Is there any law against this? Credit card companies charge as high as 4% per month.
His relative should have backed out if they knew paying 2% interest was beyond them. It’s their fault only.
Considering how easy it is get loans from bank, I always get the feeling relatives who ask for money, do so either because they never intend to return it or they have very bad credit history or they want skip paying the interest because they don’t appreciate the concept of money devaluation due to inflation. All of these are good reasons to deny lending.
Its not always easy to take loans from banks.
Credit cards charge 4% a month and thats justified because they provide a lot more service than just credit facility – convenience, online purchasing, insurance, etc. Plus they dont charge anything if you pay back within set number of days, so if you dont, you are asking for the high rate of interest. Ultimately its a convenience product rather than a loan facility.
Now regarding loans from relatives, friends – you are right that the borrower would have known and agreed to the rate. However usually people come to you when they need “help” and maybe they are in a desperate situation where they are unable to get the loans from banks or other lenders. To charge 2% monthly in such situation is not helping, rather profiteering from other people’s needs/misfortune. I think it is immoral so that was my pov in saying he deserved it.
If not immoral or deserved, by charging interest you are making it a business transaction and your motive is to make profit, and in order to make profits you need to take risks, so I still say fair game if you lose money there. You get sympathy if you lose money trying to help someone, not if you lose money trying to earn a profit.
Thats the risk of lending 🙂
Yes .. What you guys did was a big loss now .. But then this is the demerit of loaning a big amount to someone .. you never get back the money with interest !
When my husband or I loan money to relatives, we say it is a gift. Most of them return the full amount when they are able.
For the ones who don’t, we never ask for the money but we do not give more to them. If they ask for money a second time, we offer to help them set up a budget to get out of debt. They decline and disappear into the sunset.
This is the best strategy 🙂
Very apt and timely article. one thing that immediately comes to my mind is that the above article is also applicable to another similar nuisance- Request for becoming ‘guaranter of loans’ taken by friends & relatives.
I would NOT become guaranter but would help by lending the amount whatever possible within my limits without taking EMI / loan burdens on me from my end and forget the given money in that case.. 🙂
New job and straight from college there was a huge pressure from close relatives for money. I have seen their past history during my studies and so had to find ways out of this. I started RDs with the pay I got and jus had to tell them I didn’t have any. Finally was able to support my parents to pay off a portion of the debts they had borrowed for my siblings studies and wedding
Good .. Its always better to be straight and direct !
I would say never lend money for either relatives or friends. I myself facing the consequences of lending money for relatives. One of my cousin were in need of money and I helped him by taking Personal from Fullerton India by 2013 Feb.
EMI for the loan is Rs.3800. He paid the EMI for first four months only and he never paid further EMIs.
This amount will be taken from my salary account directly. I equalized the pending EMI amount using the amt I had to pay for my credit card every month. Credit card too reached its maximum limit this month.
My cousin cell phone is being switched off always. He is not at all caring about my situation. I am facing lot of issues because of this.
This is really an irresponsible behavior by your relative .. I am sure many good people will not help others just by listening to your case !
This is one of the valuable articles I have ever read. And, I have learnt the lesson harder way. Sometimes, it’s really hard to say “No” to those who need the money in emergency (and most of the time, people come to me in an emergency). What I do is, instead of saying No, I give them a little amount and I say, I don’t hold cash at home due to theft, And I never ever expect that money back. And, I give it to those whom I know very well. And many a times, I have said NO to many people and people didn’t like me too. (But, ultimately I have that peace of mind that I don’t have to chase anyone for my hard earned money).
This is a good and smart way to handling the situation I would say !
Your article reminded me of terrific tragedy that struck our family due to lending.
Me and my brother being NRIs deposited a million rupees in our parents bank accounts/PIS advising them to use only monthly interest. Later on we got to know that in lure of higher interest promised by friends/relatives, they had withdrawn the deposits and started private lending. It went well in the beginning and defaults started after couple of years or so. Every day chasing the borrowers and pressure at home to recover the money took tool on my dad’s health. He suffered Amnesia after prolonged neglect of high BP and eventually died. It was a rude shock to learnt all these things aftermath of death. Post death, even pleas of my widow mother requesting to return the money from well educated (Doctor/Govt.employee) borrowers went to deaf ears. My mom, being spent much part of her life poor, she could not let this money written off in spite of our repeated pleas. 2 years after my father’s death, in desperate attempt to get back the money as she is due for travel to US next day, visited the borrowers home probably 100th time and lost her life in a road accident on her way back home.
Being HNIs, I get plenty of requests for loans during trips to India. I vowed myself neither to lend nor to take. I maintain massive emergency fund (6 months salary in savings account – not in FD or Liquid fund) and also keep credit card. If someone ask, I would always find some excuse that he/she could have asked a week ago and just few days ago entered into some deal consuming all my surplus. It worked well for me in last 5 years and my decision of ‘not to lend to anyone’ is going strong.
Thansk for sharing your incident and how your family got affected . Never thought that lending can have so bad effects !
I once lent money to a “good” friend who required the same for his professional needs-A few months later i felt like i was the one who had borrowed the money chasing him for the money….i decided to just forget the money like a bad dream and cut off all ties with my “friend”.
Satisfied i had learnt something new i moved on till the time my wife lent money to her “best friend” and she too had a amnesia attack about it!
Sometimes i really feel its alright to be a little stone hearted about lending money in this world but at the same time it hurts you that you might miss out helping genuine people in the bargain.
i guess taking informed choices is the key in this give and hopefully take relationship. Cheers
Thanks for sharing your issue . I think most of the times you somehow sense which case is genuine and which is not . So you have to take decision as per that !
I once faced so with my LIC agent. He took 10K from me and for more than 6 months, he a not returning. So, I asked him innocently that he should give me a cheque at least. He wrote a cheque thinking that I will not be able to encash it since he had some 25-26/- in there. What I did was, I deposited the cheque in bank, got the cheque bounce letter, filed a police complaint, took a xerox copy and gave it to the guy’s wife. Next day, early morning, the person came to to my home, gave me 11K, apologized profusely for some sudden hardship, took me for a heavy lunch and gave me a lift to the police station to withdraw the complaint, I had to take an auto while coming back.
good one 🙂
Yes Sangita. it is always wise to get a post-dated cheque from the person who is borrowing and do not hesitate to deposit it in the bank. I think the threat of a police complaint should suffice, but filing the complaint is always better. However, please keep in mind that you will not get a lift from the person on your way back from the police station. 🙂
Things can be a bit tough with relatives, but I do not lend to them. My concept is clear, I will give cash support to someone who needs it (avoids the pain and anxiety of not getting the money back) only up to my comfort level. Since it will be a donation and not a loan, I keep the amount below 10K and so people rarely ask me for loans. However, I paid for a part of the medical bill and college admission fees for a few of my poor relatives.
ROFL… ohh man.. such a great sense of humor and practicality.. god bless.
I follow these practices, it works out mostly:
1. When someone is not hesitated to ask money, it is nothing wrong in asking them back when you can repay it. And remind them on the committed repayment date.
2. Tell them I have some credit card bill or other committment in 15 days, if you can repay in 12th by any situation i’ll give you else NO. And remind them in 10th day.
3. Pay them only half of what they asked for, even if they don’t repay you’ll be at only 50% loss.
4. If I suspect that there is a chance of repayment risk or next commitment date is close by, straight away say NO.
5. Simply to avoid, just say someone has borrowed couple of days back and now leftout with limited cash for rest of month.
6. Never hesitate to remind/follow up.
To the points of pkuppusamy I would add the one more point :
If a person approaches for the money, ask for the reason. Based on the circumstances you can accept or reject.
1. If someone asks money for the marriage expenses, I would deny. Because he/she can get married with the whatever amount he/she has. Worst case he/she can have registered marriage ( if at all wanted to marry…..:) ) with the least expenditure without troubling the others… 🙂
2. If someone asks money to repay his/her personal loan, I would deny. Because he/she never informed/consulted me while taking his/her loan and reason for which the loan was taken. Moreover I would justify that myself having a multiple EMIs to pay.
3. Some relative asked me to lend him money to buy a laptop. I just denied saying I already have EMIs and not having much savings.
Other instances where one can lend money fully or partially depending upon the circumstances :
1. Medical emergency.
2. School fees ( otherwise the kid/student might loose a year or so due to financial problem.)
I personally borrowed money from my friends/relatives multiple times. While taking the money itself, I told the days/months on which I would repay.
Note that I always told them period over which I can repay. But I returned their money as early as possible within the promised due dates. This has built a “Good Will” for me which can help me to borrow in future if required…:)
Very good and logical points I must say !
I am sharing my personal experience. It is good to lend money to friends/relatives when they are needy. This implies your humbleness supporting the others by lending the money when they are in needy situation. But………. getting back money from them is very very…….. very…… very……… hectic and tedious job. Around 10% of the friends/relatives will give back the money within time accorinding to their committment.
Most of the people never give back money to us. They didnt turn back also. Even if you ask they will go on says excuses to escape to give money to us simultaneously we also cant insist to give money because they are our friends and relatives.
Six years back I have given my office colleague. She came and pleaded me saying that she is loving a person and going to marry him and due to lack of sufficient money, she is not able to marry that person and she promissed that she will repay the money within two months after her marriage.
To help her to get marry, in that situation I have closed whatever FDs are there in my bank and given given to her. From that time my bad luck started……..
Like a begger from past 6 years I am go on begging her to give back my money, still I have not received my full principal amount. But she already begetted two childerns and enjoying life, for helping friend I became begger, lost my interest on my amount and still my amount is pending and go on beseaching her………
My Opinion and suggestion lend money only when you are confident and get back the money. GOD blessings will be there for good people only. Do good be Happy :>)
You lent money to a person for marriage? Do you even realize how ridiculous that sounds? It takes peanuts to register a marriage and that’s all it takes to legally get married. It only takes a truckload of money to arrange a feast, perform religious ceremonies or to pay a dowry. These are all wasteful expenses or what some may say as “optional expenses” and certainly does not warrant borrowing money people.
I am sorry to say but she made a fool out of you. She can easily leave her job anytime, change her number and you can say goodbye to that money, if you haven’t already that is.
One suggestion, if you can keep something to mortgage against the loan – like any gold item, mobile phone etc. then you can hope for recovery.
Although all people are not same…. If the other person is genuinely in need and you know that his circumstances are not good as of now, but otherwise the person is committed, you can go ahead ….
One more suggestion- If you are giving loan of 100 or 200 to a person, better keep a record of it in writing or noting down somewhere, as if you forget to note that money given by you, you cannot expect the other person to remember when and how much money he took from you… and it will be charity for that person….
You certainly stirred a horrnest’s nest.
Rajiv,I had to google to understand your comment.I got it, yeah let the best debate take place on this topic and people will choose what they want to do when it comes to lending.
Atleast some one needs to 🙂 .. we took the initiative 🙂
Glad you did.
Lend money to a relative/friend only if you can write off the money. Otherwise, saying no is the better option.
Yea .. I agree to that !
Good to see such a topic discussed on a forum like jagoinvestor. It is such a common occurrence which we face sometime or other during our life.
Giving money to friends – you can say NO
but how do you say NO to your real brother/sister or cousins. Or ask them to sign an agreement
Often in case of relative ..we end up usually writing off the money!
So give but give that much which you can comfortably write off.
Thanks Kirti for sharing your view. You will have to gather a lot of courage to say NO. Make a commitment to be honest with people and with yourself, rest will be taken care of.
Wish you all the best.Next time someone comes for money,ask that person to read above article and it will make your work easy.