Dear Moneyist, A friend of mine is getting married this summer. Over the past few years he has occasionally borrowed money and has been paying it back in small amounts regularly, but he still owes an amount in the low four figures. At this rate, it will be a few years before it’s paid off. Recommended: The next time you go anywhere, remember the $1 tip is dead[1] They are going to ask for cash donations to go towards a honeymoon or setting up housekeeping. Both of them have had their own living arrangements and do not need toasters, etc. I want to contribute, of course, but would it be better to forgive part of the loan, or give them the cash they are requesting? Befuddled Best Man Dear Befuddled, I have two pieces of advice for you: Don’t lend your friend any more money and don’t mix up the long history of these ill-advised loans with his wedding present. He might hope you will forgive a large portion of the loan as a wedding gift, but that doesn’t seem fair to either of you. He borrowed the money and he should repay it. You can give him money as a wedding gift if you like, but I see a request for money in lieu of a wedding gift as just that — a request. Give him a nice gift. Some tea cups[2] or a bottle of champagne to be opened on their first anniversary with two champagne flutes. His marriage is, however, a good opportunity for you to sit him down and arrange a payment plan a couple of months after the wedding. He will (or should) want to start making financial plans with his new wife, and she definitely should be aware of any outstanding debts, especially debts that involve a dear friend. You may or may not choose to give him a haircut, but in the spirit of transparency and this new payment plan, ask him to notarize the loan agreement. About two-thirds of loans to friends and family are not repaid, and oral agreements are notoriously difficult to enforce. Also see: My boyfriend and I have two kids — should I pay off his $130,000 student debt?[3] My approach may sound harsh, but there’s a reason why some people borrow money from their closest friends. Banks have turned them down, other friends and family have seen how they mismanage their finances and they have also said no. Plus, it’s easier to rely on friendships for both loans and the non-payment of loans. After all, the collateral here is the friendship itself. If you insist on your friend paying the money back, it rocks the balance of power in the friendship. He can end it and walk away. But people who borrow from friends often rely on that as leverage. ... My friend owes me thousands of dollars and wants cash instead of a wedding gift — should I write off part of the loan?
- Category: Economics
Dear Moneyist, A friend of mine is getting married this summer. Over the past few years he has occasionally borrowed money and has been paying it back in small amounts regularly, but he still owes an amount in the low four figures. At this rate, it will be a few years before it’s paid off. Recommended: The next time you go anywhere, remember the $1 tip is dead[1] They are going to ask for cash donations to go towards a honeymoon or setting up housekeeping. Both of them have had their own living arrangements and do not need toasters, etc. I want to contribute, of course, but would it be better to forgive part of the loan, or give them the cash they are requesting? Befuddled Best Man Dear Befuddled, I have two pieces of advice for you: Don’t lend your friend any more money and don’t mix up the long history of these ill-advised loans with his wedding present. He might hope you will forgive a large portion of the loan as a wedding gift, but that doesn’t seem fair to either of you. He borrowed the money and he should repay it. You can give him money as a wedding gift if you like, but I see a request for money in lieu of a wedding gift as just that — a request. Give him a nice gift. Some tea cups[2] or a bottle of champagne to be opened on their first anniversary with two champagne flutes. His marriage is, however, a good opportunity for you to sit him down and arrange a payment plan a couple of months after the wedding. He will (or should) want to start making financial plans with his new wife, and she definitely should be aware of any outstanding debts, especially debts that involve a dear friend. You may or may not choose to give him a haircut, but in the spirit of transparency and this new payment plan, ask him to notarize the loan agreement. About two-thirds of loans to friends and family are not repaid, and oral agreements are notoriously difficult to enforce. Also see: My boyfriend and I have two kids — should I pay off his $130,000 student debt?[3] My approach may sound harsh, but there’s a reason why some people borrow money from their closest friends. Banks have turned them down, other friends and family have seen how they mismanage their finances and they have also said no. Plus, it’s easier to rely on friendships for both loans and the non-payment of loans. After all, the collateral here is the friendship itself. If you insist on your friend paying the money back, it rocks the balance of power in the friendship. He can end it and walk away. But people who borrow from friends often rely on that as leverage. ...