How to lend money wisely





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We all have been there: you trustingly lend your hard-earned money to a “friend”, and when it’s time for them to pay you back, they hide from you, come up with the most creative excuses or worse, ignore you. Sometimes, you get so traumatized and decide to just say NO to all those people who ask to borrow from you. But there’s good news: there are steps you can follow to reduce, if not eliminate, the risk of such financial and friendship losses.

The following are five practical ways and precautions to avoid such.

1. Give instead of lend-  When friends or relatives notorious for not paying their debts asks to borrow 5000 from you, promising to pay you back in 3 days, will you lend money to them? I shall use my Uncle Ben (Benevolent) rule here: You can give 1%-10% of the amount they’re asking for, if you think that can help them. Let us remember that it is easier to give than  to collect money from borrowers. We are so shy to wear our collectors’ hat. I have many friends who get stressed out when it became time to collect. They lent so much money to common friends but rarely got it back, or on time.

2. Think, don’t just feel- When your friend is in an emergency and he/she asks for financial help, claiming to need this and that, sometimes you act without thinking and you immediately lend a hand. Your money is like ammunition when it comes to war. What if an enemy attacks you and you are left with no ammunition because you’ve lent it away? What are you going to do? Stop and think first, your savings account will dry up if you let your emotions rule you. I have a theory on why God put the brain above the heart: He placed it there so that it may rule over our easily deceived hearts.

3. Draft and Sign a binding agreement- The situation is this: They are asking to borrow 50,000 from you so they can fund their business, or they need to pay for an emergency situation. They promise that within 6 months, they will pay you back. You have money in the bank. The problem is how to wisely lend your money with minimal risk. Too many relationships both personal and professional have ended up being ruined because of unpaid debt. So my recommendation is to write down what was agreed upon, have it duly signed by both parties to ensure the presence of a clear agreement. Commitment is not optional since you guys are friends.  He needs to take the agreement seriously, and the payment terms should be clearly defined and followed. By simply writing it on a piece of paper and having it signed, you will have something to present to any arbiter just in case your borrower decides to run or hide from you. You can file a case against them at your nearest small claims court. This is a problem with the culture that we have: this is not a widely held practice at all. I encourage you all to be different in this case. There’s not much difference whether it be a big or small amount since it is not about the money in the first place, but rather about the principle of trust.

4. Assess the situation- You have a friend who is a party-goer, who frequently eats in upscale restaurants, who has so many gadgets and owns a brand new car. His family has a house bigger and better than yours. All of a sudden that friend got into a big mess and is now asking for your financial help. I recommend that you first ask why and how he came to be in such a mess. Let me remind you managing, not wasting, the money you have worked hard for is your primary task. When you find out what happened to that friend, you empathize and then assess your finances first to see if you have enough funds. Dig deep, be upfront, be concerned. Don’t be ashamed to ask why they need borrow from you. Asking them will also help you to make good financial decisions in the future. Is this for a worthy cause? If you demonstrate good and sound financial decision-making, it will be an opportunity to inspire others to follow your ways.

5. Learn to say No and be honest!- There are times with you really have to say NO to people asking to borrow from you. Whether it be due to your own lack of financial security, or due to your lack of trust, or due to your desire for them to learn, being honest is the best way to go about saying NO. Do not feel guilty about it. Do not also recommend other people to them for it will cause more problems. Don’t ever use your credit card for cash advances for it will cripple your sound finances with long term dues the fees involved.

An excerpt from got questions.org

The clear teaching of the Bible is that God expects His children to act righteously when lending money. And it helps us to remember that our ability to produce wealth comes from God (Deuteronomy 8:18) and it is God who “sends [both] poverty and wealth; He humbles and He exalts” (1 Samuel 2:7). Now, there is nothing wrong with legitimately loaning money and expecting to be repaid at a fair rate of interest (Proverbs 28:8; Matthew 27; Psalm 37:21). Yet we need to remember that the Bible’s teaching on money matters also includes borrowing money and indebtedness. Although the Bible does not expressly forbid borrowing money, it doesn’t encourage it, either. It is not God’s best for His people, as debt essentially makes one a slave to the lender (Proverbs 22:7). God would rather have us look to Him for our needs than rely on lenders. Additionally, as the psalmist makes clear, we are to repay our debts (Psalm 37:21). When we loan money to someone, we increase that person’s debt load and make it easier for him to stumble.

Thank you to the Chief editor: Gandalf the black

David Isaiah Angway is a Financial Evangelist