I have. Twice in my life.
The first time was $15,000 and the others was $4,000 to two different people.
On both occasions, once I hit the transfer button, I regretted it immediately.
I don't know why I didn't learn my lesson after the first occasion and I was dumb enough to do it again.
Lucky for me, both returned the money to me in a reasonable enough time after I bugged them for awhile, within 2 mths. Essentially, they already had the money on hand but since the due date was not up, they conveniently did not return me the funds.
The thing that crossed my mind was very simple. How was I to determine that they really needed the money for whatever story that they have told me? What if after I transferred them the money, I see them driving around in a new car? There's very little I could do once the funds left my bank account. So I felt really stupid not once, but twice.
So I would urge any of you, if you are thinking or if in future if anyone asks you for a loan, please refrain from being a nice person. It's just not worth it.
(I'm not talking about those cases when a friend borrows $10 cos he forgot to bring his wallet. Those are typically fine, although those usually also tend to forget to return the money as well. But usually those are really incidences of absentmindedness.)
But those big amounts and usually they have a sob story behind it, lost money due to gambling, or trying to tide over one month cos messed up the cash flow for the month, etc, those, I highly don't recommend lending.
As what they all say, if you lend the money, you lose your money and you lose your friend. Might as well just lose the friend and keep the money.
I've spoken to many friends and somehow, many have experienced lending money to someone at some point in their lives.
I'll summarize a number of possible outcomes.
The person returns the money on time. Regardless of interest.
Next best scenario
The person returns the money late, usually with lots of "reminding".
Within a fairly reasonable period, 6months.
I've noticed after talking to friends that usually, even if they have the money, they won't be gracious enough to return the money without reminders.
The above 2 scenarios are super rare.
Typical scenario 1
The borrower pays installments and after 2-3 payments, conveniently forgets to continue to pay. Lender has to almost "beg" the borrower for payments every month.
Regardless, things start to turn sour in the relationship. The borrower will then either continue or stop payments.
Usually they stop payments and you lose the friend.
The other typical scenario 2 is...
Well after borrowing the money, the party just disappears. Somehow is uncontainable. But yet, other friends are able to still remain in contact with him. It's obvious at this point, the person isn't going to return the money.
So really, just don't lend the money. The interest you earn just isn't worth it. The default rate is super high cos you don't have much recourse to get the money back, and they know that, so they will think "so what can you do about it?". And you feel like an idiot after that cos you were so nice thinking that you were helping a friend.
Think about it, if they had the financial disciple and prudence, why would they require to borrow money anyway? They would have saved up a stash and would be able to withstand a small shock to their cash flow. Chances are, if they had cash flow issues, then that would mean that they are poor at handling money and if they are poor at handling money, then chances are they cant return the money anyway.
So the lender is almost always in a lose-lose situation.
You lend, you probably lose the money and would have a strained relationship with the friend, you still have to remain cordial with him to stand a chance at getting the money back.
You don't lend, the friend may ignore you in future, but at least you don't lose the money and you won't need to maintain a cordial relationship just cos you are locked in that position.
So we hear this all the time from our parents or other elders cos they have been through it. Don't lend money to friends, you lose the money and you lose the friend. It's very true, and yet generation after generation, people still fall into the same predicament.
This is also the same for family members. Who may be harder to reject. But it's still the same, a cousin, uncle, auntie, niece, nephew, brother, sister, even parents. Things will almost always get strained once the loan is done. So might as well don't do it.
My typical answer if someone asks me for a loan is that, I am jobless and we are living only on one income and our cash flow situation is not very good. I don't think I'm lying, it's pretty true.
Another good response would be, actually I'm in credit card debt, not many people know this so please don't tell anyone, please don't tell my wife or parents.
It might sound obvious, but when the time comes and someone comes up to you with a sob story, you better be ready with good reasons, cos it won't be easy to reject them politely.
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