To Lend or Not to Lend
Maybe it catches you off-guard. A friend or family member asks to borrow money and you’re not sure what to do. It’s wise to consider your options. Your decision whether to lend money could have lasting consequences, so make it carefully. There’s no question that the decision to lend money causes stress for many people. When you lend money to another, it changes the nature of the relationship. Proverbs 22:7 really nails this, "The borrower becomes slave to the lender." Lending money has the potential to damage a relationship well into the future. Actually that’s true whether you lend the money or not. When you’re hit with the question, it seems like there’s no good answer. Either way, someone may end up resentful. And the odds may be stacked against you to begin with. A football coach once explained why he never liked throwing the ball. He said that three things can happen: an incompletion or interception or a completed pass. It’s like that with lending money. If you decide not to, the other person could be upset. If you do lend the money and the other person doesn’t repay it, you’ll probably be upset. That’s two out of three, bad. It’s only with the third possibility where everyone’s happy. You lend, they pay back. But they may not be in very good shape financially to begin with if they’re having to borrow. Now, what does the Bible say about all this? First, God’s Word tells us to help those in need, lending money if necessary. Deuteronomy 15:8 says, "You shall open your hand to him and lend him sufficient for his need, whatever it may be." And in the Sermon on the Mount, Matthew 5:42, Jesus says, "Give to the one who asks you, and do not turn away from the one who wants to borrow from you." And a verse that makes many think the only proper response is to lend money to a family member, in particular, is 1 Timothy 5:8: But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever. But those verses imply a couple of things. First, that there truly is a need and second, that lending the money would actually help the borrower and not simply enable more unwise financial practices. Scripture says a lot about that, too. Proverbs 13:11 indicates one possible outcome to lending money. It reads, "Wealth gained hastily will dwindle, but whoever gathers little-by-little will increase it." A loan is often described as a lifeline, and it may be. But it’s also easy money and the borrower may not appreciate the effort it takes to create that wealth. When you have to work hard for something you tend to want to hold onto it. Hard work produces character and wisdom. Proverbs 21:20 reads, "Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it." So before you get out the checkbook, you have to determine that there’s really a need and that lending will actually help. Can the borrower repay the loan? If there’s not sufficient income or ability to repay, good intentions to repay will come to nothing. What shape will you be in if the money isn’t repaid? If you can’t afford to lose it, you can’t afford to lend it. Can you help in some other way? If the would-be borrower needs money to repair a car, for example, could you give rides instead until they save money for repairs? Finally, could you make the money a gift instead of a loan? That way, you’re not expecting it to be paid back so you can’t be disappointed. Also, your relationship won’t be damaged. But again, only do that if the gift doesn’t encourage unwise practices. If you decide to lend money, draw up a written agreement even if you’re lending to a family member. That has a way of clarifying things and making it known who’s responsible for what and when. The loan agreement should specify the amount, interest rate if any, payment structure and collateral, if any. That will help eliminate misunderstandings later on. It’s easy to do, by the way. Just search for promissory note template and fill in the blanks. You’ll find plenty of samples online. One final thought. If you lend to another, I would always put the relationship above the money. Err on the side of forgiving the loan to preserve the relationship, if you can. That’s only possible if you lend with the ability and willingness to lose it in the first place. On today’s program we also answer your questions: --How do I remove hard inquiries from Equifax? --My emergency fund is currently in a credit union. Wouldn’t it be best to put this into a regular bank or a CD instead of a credit union? --I have built up enough money in my 401(k) to pay off my house. Is that a good idea? --What options do I have with an annuity? Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to [email protected]. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, purchase books, and even download free, helpful resources like the free MoneyWise app. Like and Follow us on Facebook at MoneyWise Media for videos and the very latest discussion! Remember that it’s your prayerful and financial support that keeps MoneyWise on the air. Help us continue this outreach by clicking the Donate tab on our website or in our app.