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Sunday, November 17, 2019   
 

Survey Results: Lending to Friends
by Scott Bilker
Scott Bilker is the author of the best-selling books, Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart. He's also the founder of DebtSmart.com. More about and DebtSmart can be found in the online media kit.
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Scott BilkerThis survey originally ran in the 10/9/02 DebtSmart Email Newsletter.
To take the survey click here.

Some interesting results:

1) 70% report that they've lent to family with only 38% saying they were paid back in full. However, when asked if they'd lend money again 59% said yes!
2) 59% reported lending money to a friend and 27% were paid back in full, but when asked if they'd do it again 37% said yes. This indicates to me that overall, lending to family has worked out better than lending to friends.
3) The "no's" have it when questioned about working with a third party to manage loans between family and friends (about 65%).
4) The majority agree on both the borrowing and lending sides that it is fair to charge and repay interest fees when lending or borrowing from family and friends.
5) 40% said that a reasonable amount to charge for interest is between 4% and 8%.

Have you ever lent money to a family member?

70.27% of respondents said Yes
27.03% of respondents said No
2.7% of respondents said Not Answering

If yes, did they pay you back?

37.84% of respondents said Yes
8.1% of respondents said Partially
24.32% of respondents said No

Would you ever (or ever again) lend money to a family member?

59.46% of respondents said Yes
27.03% of respondents said No

"I never lend a large amount of money, mainly because I don't have a lot. But with family, you just help each other out, at least that's how it is in my family."
--Keely

"I would only lend money to my mother because I know she is responsible and would pay me back. I don't like to lend money to anyone though. It puts both people in a bad position."
--Anonymous

"No choice. As much as I like money, they are in worst shape than I am. I'm talking close family members not cousin or above."
--Jose

"Not that particular family members but others certainly. They've loaned me money, it seems only proper to repay the favor if they need it."
--Anonymous

"Don't loan money unless you can do without it if it is not repaid."
--Anonymous

"Family is family. If a family member was in a legitimate bind I would help if I could. But if the bind is caused by constant negligence on their part, example: they spend unwisely all the time, forget it. they are on their own."
--Shawn

"When you make it known right from the start that the money is a loan and not a gift and then they don't make an effort to pay you back, I say don't loan a family member or friend any more money. I told them next time go get a bank loan or a loan from a finance co. We did when we needed money."
--Anonymous

"I think it is not a good idea in general to lend money to a family member if one is looking to be paid back. I think it is too easy to get into a difficult situation in the case when the family member cannot pay back. I think if one does loan money, consider it a gift and if the family member pays you back, that's fine - if not, forget about the money."
--Anonymous

"I think lending to family should be done as a bank would--determine the risk, whether you think you can live without ever again seeing the money. If you can't, don't--family relationships are not worth ruining over money issues."
--Lucy

"If they needed it and we had it, yes I would lend it to them, HOWEVER.... yes, I expect repayment but rarely get it. Our thoughts on this is NEVER LEND MONEY TO YOUR KIDS THAT YOU CAN'T AFFORD TO LOSE. They're great kids and are really struggling; maybe someday........."
--Anonymous

"Our family established a family emergency fund for any family member who needs money ASAP. They have a deadline to pay back the money with interest, but the money is always there to lend."
--Maria

"I think that if you lend money to a family member or a close friend, you should give it knowing that you won't get it back. This will save alot of frustration and worry on both parts. We only reap what we sow. There is nothing wrong with giving and not receiving, because the reward for giving is so much greater."
--Josh

"I think lending or borrowing money from family is tough. It ends up with hurt feelings. My husbands father, puts interest with it, and that makes it really hard. I would stay away from lending to family members."
--Crystal

"I treat it as a business transaction and write up a contract for it, etc. I know it sounds tough, but this protects both of you and helps the recipient to take borrowing more seriously."
--Anonymous

Have you ever lent money to a close friend?

59.46% of respondents said Yes
37.84% of respondents said No

If yes, did they pay you back?

27.02% of respondents said Yes
18.91% of respondents said Partially
13.51% of respondents said No

Would you ever (or ever again) lend money to a close friend?

37.84% of respondents said Yes
32.4% of respondents said No

"I would never lend my friends a large sum of money because that can really cast a cloud over your relationship. I usually lend the amount of money that I can live without, just in case it's never returned."
--Keely

"It depends how close they are and how desperate."
--Jose

"My husband has done this and of course never saw a penny of it come back."
--Elaine

"To some friends, but definitely not others!"
--Michelle

"I have not learned my lesson yet in lending money to friends. I have a few friends who will pay me back my $20 the following week. I have also lost thousands by letting friends borrow or put something on my credit card and have never been paid back for it."
--Anonymous

"You have to think about how this friend dealt with money in the past."
--Anonymous

"Lending money to friends is a big no no unless you are well off enough to do so. Your average family man such as myself couldnt afford to take the chance of realistically never seeing that money again."
--Shawn

"My friend doesn't always pay back right away, but when they do, they add a little extra for the wait."
--Anonymous

"You can pick your friends but God help you when it comes to your relatives!!!!"
--Anonymous

"Most of our friends are trustworthy, but we would be selective. The best idea is to get everything in writing so there are no misunderstandings."
--Anonymous

"Again, only if I considered it a gift so that I'm not upset if it's not paid back."
--Amy

"I find that when you lend money out to friends, it compromises the friendship. So, it's better to just give them the money and kiss it goodbye!"
--Maria

"Too many hurt feelings. People are going to be people. We are just human, and I've learned that you can't trust everyone. I have to know them very well, and it really all depends on the situation. I won't lend money, but I'll give it, cause that way, it won't cause any hard ships."
--Crystal

"Again, treat it like a business transaction and have a contract written up."
--Anonymous

When you lend money to friends or family do you expect repayment, or is it better to think of it as a gift?

51.35% of respondents said Gift
43.24% of respondents said Repayment

Would you be more likely to lend money to a family member and/or close friend if a third party were managing the repayment of the loan? The third party would send out the bills, collect the money, charge a small fee, and send you the payment?

62.16% of respondents said No
27.03% of respondents said Don't Know
10.81% of respondents said Yes

"I'm not a bank and this would make me feel like one."
--Anonymous

"It would depend on the amount of money that I would be lending and the terms of the agreement, like how many months/years for it to be repaid in."
--Anonymous

"If I'm loaning I'm doing it personally."
--Anonymous

"If the person is responsible enough to ask for the loan, they are responsible enough to repay it. You wouldn't be lending the money if you didn't think they were responsible enough to pay it back."
--Shawn

"I've loaned money to family / friends a total of four times. Each and every time, I have been extremely disappointed by their repayments (or rather, lack thereof.)"
--Mike

"I think to involve a third party is asking for trouble. Just determine whether or not this person deserves your help, and if they should default on the loan, whether or not you can live with those facts. Those should be the only considerations, really."
--Lucy

"This seems kind of cold, but if you have had problems in the past, I can see where it would be valuable."
--Anonymous

"I have no qualms with a third party if it's with a friend, but family is family and you need to help out."
--Maria

"That might help..and kind of interesting."
--Crystal

Is it fair to charge a reasonable interest fee when lending money to family member or close friends?

48.65% of respondents said Yes
37.84% of respondents said No
13.51% of respondents said Don't Know

"I would feel funny charging interest unless it has reached a point where they are very late paying me back and I needed the money."
--Anonymous

"You should at least equal what they would be getting if they had it in savings."
--Elaine

"Only on a big loan."
--Michelle

"It depends on the agreement you make. If it is only a few months and a small amount I don't mind so I wouldn't charge them interest. If it is more money and time I would charge interest. After all I am the one lending the money and probably paying interest on it so why should I have to pay the interest on money that I don't have in my hands."
--Anonymous

"The going rate in our family is whatever that money would have made in a savings account. If there's no money in savings then there's no money available to borrow."
--Anonymous

"If you are going to charge a fee, don't loan the money."
--Anonymous

"That's the catch, I was always taught loan from a family member is interest free, or else you would have just gone to the bank for a loan or credit card."
--Shawn

"JUST PAY BACK THE PRINCIPAL WHEN YOU BORROW FOR GOSH SAKES!!!"
--Anonymous

"If they don't like it, tell them to get the loan at a bank at a higher rate."
--Mike

"Sure. It's a loan, isn't it?"
--Lucy

"This is fair, especially for long terms loans or loans where the repayment plan is not spelled out."
--Anonymous

"I'm not sure. I've always thought about it being family, you should treat them a little bit better. When my husband's dad did that to us, it caused some hard ache with me. I couldn't believe it. My family has never done that to me. I've all ways paid back every cent to my family or friends. I believe, do unto others, what you want them to do unto you."
--Crystal

"In this world you have to pay your own way. It was expected of you - why not your family member or close friend!?"
--Anonymous

What rate is a "reasonable" rate to charge family and friends?

24.32% of respondents said 0%
13.51% of respondents said 2%
8.1% of respondents said 4%
21.62% of respondents said 6%
10.81% of respondents said 8%
21.62% of respondents said Don't Know

Have you ever borrowed money from a family member?

81.08% of respondents said Yes
16.22% of respondents said No

If yes, did you pay them back in full? If not, why?

64.86% of respondents said Yes
8.1% of respondents said Partially
5.4% of respondents said No
21.62% of respondents said n/a

"The only people in my family that I've ever borrowed from are my parents, and that was when I was in high school and college. It was always called a "loan", but I think they knew they were never going to see the money again. I didn't have a job, so I could never pay them back."
--Anonymous

"I borrowed some money from my aunt and I payed the money back in monthly installments with no interest charged."
--Anonymous

"I try to only borrow money when absolutely necessary. I always say the date I will pay them back, like on Friday when I get my paycheck."
--Anonymous

"The life of the loan is not yet complete. Still paying it back."
--Shawn

"I have never borrowed from family. Don't think I ever would, either."
--Lucy

"My father did not want me to pay him back when I asked to borrow money from him. I tried to repay, but he wouldn't accept the money from me."
--Maria

Would you ever (or ever again) borrow money from a family member?

51.35% of respondents said Yes
29.73% of respondents said No
18.91% of respondents said Don't Know

"Now that I have a full-time job I'd be really hesitant to borrow money from my family. Unless it was a real emergency, then I would try to make due with what I had."
--Keely

"If I had nowhere else to turn and a family member offered, I would borrow money. I know I am responsible enough to pay it back."
--Anonymous

"Not unless totally desperate."
--Elaine

"Only in the most desperate of circumstances. Too me it is a matter of pride."
--Michelle

"Not unless it was life or death."
--Anonymous

"Its a double edged sword. on one hand you get a loan interest free, on the other hand they watch every penny you spend and never let you forget you owe the money. In a real bind would probably borrow again, but I would look elsewhere for the money first."
--Shawn

"I paid them back because it is the right thing to do. I am a trustworthy person, so I cannot even imagine not paying a family member back when they trusted me."
--Barbara

"Don't think I would--I have seen what a family loan can do to family. It isn't pretty."
--Lucy

"These are not great amounts, just gas money; but our integrity demands that we pay the amount back."
--Anonymous

"I hope we would never need to!! But if we did, I suppose we would."
--Anonymous

"I can count on my family members to help me out in a difficult situation. But, at the same time, I will not add to any of their financial burdens if they are also in a bind."
--Maria

"I hope I never have to!"
--Angela

"I hope that I wouldn't have to, but if the case ever come up to where I'll need it, I'll ask. I want to stand on my own two feet."
--Crystal

"If I got between a rock and a hard place to the point where there's no way around it, I may not have any choice!"
--Anonymous

Have you ever borrowed money from a close friend?

56.76% of respondents said No
37.84% of respondents said Yes
5.4% of respondents said Not Answering

If yes, did you pay them back in full? If not, why?

62.16% of respondents said n/a
37.83% of respondents said Yes

"I've never borrowed more than $20 from a friend. I think it puts a strain on the relationship if friends borrow money. I don't even like to borrow a couple dollars, but sometimes when we go out to dinner and I don't have exact change, they will pay and I will pay them back. That is the only time I would borrow money."
--Anonymous

"Money and friends don't mix well in my experiences. I only want to borrow money if really necessary and I always make sure I pay it back ASAP. I don't want someone to be bothered by the fact that I owe them money and may have forgotten about it."
--Anonymous

"I think borrowing from friends is even worse. They have their own issues. Unless they offer to help, you really shouldn't bother them with your own issues."
--Lucy

"I've never borrowed more than $5.00. I think when it's a few dollars, it's okay, but never more than $100."
--Maria

Would you ever (or ever again) borrow money from a close friend?

37.83% of respondents said Yes
35.14% of respondents said No
27.03% of respondents said Don't Know

"Like I said about my family, but I would probably have a harder time borrowing money (unless it was $10) from a friend, who are all in the same financial bracket as I'm in."
--Keely

"Only if it was less than $100."
--Anonymous

"Never again will I borrow from a friend, no matter how desperate I am."
--Anonymous

"It would depend on the situation. I'm more comfortable borrowing from family than friends."
--Anonymous

"Friendships can be ruined over something like this. Its not worth it."
--Shawn

"If I absolutely needed to I would borrow the money. but I would try to find some other way first."
--Barbara

"I respect my friends too much to borrow from them."
--Lucy

"I may not have any choice if the need really did arise."
--Anonymous

Who would you pay back first?

72.97% of respondents said Friends and Family
24.32% of respondents said Credit Cards

Who would you rather pay interest charges to?

59.46% of respondents said Friends and Family
27.03% of respondents said Banks
13.51% of respondents said Don't Know

Would you be more likely to borrow money from a family member and/or close friend if a third party were managing the repayment of the loan? The third party would send you the bills, collect the money, charge a small fee, and send them the payment?

67.57% of respondents said No
18.91% of respondents said Don't Know
13.51% of respondents said Yes

"I'd rather go through a bank to do this if possible."
--Anonymous

"I do a very good job of keeping track of the money I borrow from friends/family members. I make sure I write down each payment that I make and what the date is. I would rather not pay interest at all if I can help it. I am not sure who I would rather owe interest to, the bank or a family member. I gave a family member interest on money I owed her only because I knew that she was paying a very little amount of interest but why should she have to pay for it when I am the one borrowing the money. She never charged me interest on the loan, I just gave her some extra money in the final payment."
--Anonymous

"The purpose to borrow from family is to avoid all that."
--Shawn

"I would prefer to work on trust and good will."
--Barbara

"I don't think it's wise to involve excess people in family-monetary transactions."
--Lucy

Is it fair to be charged a small interest fee when borrowing money from family members or close friends?

59.46% of respondents said Yes
24.32% of respondents said No
16.22% of respondents said Don't Know

"It depends on the relationship the family members have. If it is not a close relationship, I guess charging interest wouldn't seem so strange."
--Anonymous

"I would never charge interest, no matter who borrowed it from me."
--Anonymous

"It depends on the amount of money and how long it will be borrowed for. I don't want to pay interest on money that I don't have so why should they? So, yes, depending on the situation, I should be paying the interest on money I borrowed."
--Anonymous

"It is fair if both parties can agree on an amount."
--Barbara

"It's a loan. Learn to live with interest if you borrow."
--Lucy

"I'm not a bank and I'm sure that if banks knew I was taking their business w/o having to follow the rules they do, they'd be mad. Nonetheless, I love my family and friends :o)"
--Angela

"You have to pay interest for other loans you receive - why not pay it to family or friends for the loan they gave YOU?!"
--Anonymous

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