I heard a horror story recently about a middle-age man who loaned his friend a big sum of money. It turned out that the friend couldn’t pay him back. Now he only receives a small monthly contribution and lives in squalor.
It’s funny how distant family find out about your significant financial events in your life. Suddenly they make all sorts of claims, pouring on the guilt, and want you to give them money.
Businesses often sit in the same situation. A supplier will provide a going concern with stock only to find out that the customer is in deep financial trouble and won’t be able to pay them.
That’s why someone close to me never loans money to family or friends but rather gives it to them. This wouldn’t be large sums but small amounts that she can effectively right off.
When somebody asks you for money they put you in a very difficult situation. The reason is that once you have loaned them the money you are their prisoner. You have to continually ask them to pay you back the money which is in itself an embarrassing thing to do. You have no security on the loan and you are at their mercy.
Solomon says “Borrow money and you are the lender’s slave”. But the same applies when you loan money without security. Solomon also says “Anyone stupid enough to promise to be responsible for a stranger’s debts ought to have his own property held to guarantee payment.”
In these times when money is tight because of a crumbling economy it’s important to be ultra cautious when someone asks you for a loan.
Even the so-called highly principled, turn out to be nothing more than lowly grubbers who will never pay you back.
It’s up to you in the end, but there are too many horror stories of people never paying back money that should caution you.