Everyone has been on the receiving end of that phone call from a good friend – he overspent on the long weekend, he’s a bit tight right now, would you be a real friend and help him out with a few grand, just until month end.
What can you say to that? You do the right thing and help out. Month end comes and goes, the months stretch out, and you begin to wonder why your friend, who has a stable job, can’t pay you back? Perhaps the lure of the ponies is stronger than your friendship, and that’s where the money is going …
Your dad always used to quote Shakespeare: ‘Neither a borrower nor a lender be, for loan oft loses both itself and friend’. Shakespeare was giving us a timeless piece of wisdom – don’t lend money to your friends because you will lose both.
Why is it so risky to lend money to friends and family?
Either you will have to nag your friend to repay the loan, which will make your friend resent you, or your friend will not repay the loan, which will make you resent your friend. It becomes more and more difficult to talk about the loan and, finally, the relationship just fades away. This is even worse if it’s a family member.
That’s not to say that you should never help a friend. You could ask someone to stand surety for the debt, but be sure to get that surety in writing.
As a Small Claims Court commissioner, I was involved in a case where a father was sued on his promise to pay his son’s debt, I had to throw it out because it was a verbal agreement. As a general rule, contracts don’t have to be in writing with a few exceptions, significantly, in this case, surety agreements must, according to section 6 of the General Law Amendment Act, be in writing.
Everyone runs into money trouble at some time in their life, but everyone has a friend that runs into money trouble more often than not and that’s the friend that maybe needs to help themselves.
