How to Lend Money to Family and Friends Without Straining the Relationship

With the global outlook of today’s economy, it is easy to understand why some people fall into the dark monetary path. The sad truth is that not everyone can acquire loans from the bank. The next best thing is to approach a friend or a family member whom they deem as financially capable.


One of the first few people that pop into the minds of many is the OFW. There is a common misconception that people who work overseas are instantly rich. You cannot hide that you make Aussie dollars!


I am sure that you want to help out a loved one who is in great need. However, it may feel like you are entering a minefield. This is a tricky situation that you must handle with caution. Follow these helpful tips:


Lend the Amount That You Are Comfortable to Lose

Lend money you are comfortable to lose

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Since the people close to you know that you are earning Australian dollars, they may think that you are capable of lending a hefty amount of money. This is a common perception that many Filipinos have. With this perception, they may ask you for an amount that is far from what you are capable of lending.


Imagine the boiling tension that can arise if both of you needed the money and the borrower cannot repay you. You may never catch a glimpse of that money ever again! This is why it is best to lend a substantial amount that you can only afford. If the borrow never returns the money, the situation will not tarnish your own savings.


Do Not Be Afraid to Utter “No!”


Your hard-earned money belongs solely to you. You have no obligation to anyone besides the Philippine or Australian government, your creditors, and your dependents. Do not hesitate to politely reject a request if you are not comfortable with loaning money to a friend or a family member.


Let him or her understand your own financial situation. If the person cannot move on, you will be better off for it.


Put Everything in Writing

Put it into writing

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To ensure strict repayment, you must treat the transaction as a business deal and not as a friendly matter. Make a handwritten promissory note that includes the repayment terms, interest rate, and other critical items. Have both parties sign the original documents and its copies. You may place it on your visual board or fridge to act as a reminder.


If your friend or family member misses a payment for a month, this binding paper can decide what the next move shall be. The relationship becomes less personal and more businesslike!


Do Not Expect Anything in Return


Avoid planting grudges by not expecting the borrower to help you with anything else besides what is stated on the agreement.


Sure! It is polite to offer other means of support to your creditor, but not everyone thinks that way. Reciprocity is not a part of everyone’s vocabulary. Also, it is unfair to place elevated expectations on unsuspecting friends or family members.


Handle the Issues Immediately

Handle the Issues Immediately

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Do not let the issues slide! If you are the type of creditor who allows lateness or ignores misbehavior then, these may continue on. Enforce the guidelines as rules and not as a loose suggestion. Let your borrower know that you are keeping track of the situation even if you are overseas. Do these things so that neither of you will feel like you are taking advantage of the other.


Do Not Sacrifice Privacy


This agreement is between you and the borrower. This is not between you and your hairdresser. Nor is it between you and your borrower’s driver. You must not tell anyone else about the loan unless the situation asks for it (e.g., telling your financial advisor or lawyer). Address the situation in the proper context when misbehavior happens.


Do not scream at your borrower for missed payments during a Skype video conference with the whole family. Instead, make a mature encounter in private.


Offer to Help in Other Ways


Provide other suggestions on how you can improve their financial situation aside from just lending money. I am not saying that you shall constantly give unsolicited advice! Instead, offer support and encouragement without being too pushy. Give a helping hand to a loved one who lacks money-saving techniques or budgeting skills. Impart your financial wisdom to the borrower so that he or she can rely on you less.


Lending money to friends or family members may not be the best financial decision you can make. But, it is a scenario that most OFWs face. May these tips help you to handle the transactions more smoothly.

Anna Agoncillo

Anna is a Registered Psychometrician and a graduate of Cardiff Metropolitan University, United Kingdom. Earning a bachelor's degree with honors in Psychological Studies, lead her to a career of writing and teaching. She is also the author of the new book entitled Psychology of Love, Money, & Life.


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