Why You Shouldn’t Lend Money and the Actual Reasons You Do

This is going to catch some of you off guard, but psychologically you will find out that this is one of the best explanations on why you shouldn‘t lend money that will help you avoid a lot of anger, hurt, resentment and emotional turmoil.  Plus, even more importantly you can avoid burning bridges with loved ones, close relations & good friends.  So, keep reading on to find out the real reasons we loan money and how to stop yourself from doing it.

How it starts

A person close to you, that is a friend, relation or colleague calls you or meets you in person. They want to ask you for a considerably significant amount of money as a loan.  This amount is certainly money that you would also need and cannot do without.  This would be an amount of cash that you will need, to spend for your own needs in the coming days or months. 

Or it can be an amount that has taken you years to build up as savings.  Given the uncertainties in life it’s the responsible thing to keep aside a nest egg of sorts for rainy days. So yes, you may not need it right now, but the money is definitely important to you. Still, you might think that you can actually lend the money, given that you’re going to get it back soon.

Building the case

Given that it is someone close to you, they would be frank & upfront on why they need the money. And they will reassure you by giving a definite date that they can settle the debt to you.  Everything sounds great!  You get to help someone that is close to you and they are definitely going to pay you back!  And, you can lend them the money right now, no problem!

You would rightfully, albeit naively, assume that they would keep their word, given that you are helping them in a much-needed situation. And this, you assume would further strengthen your long-standing relationship.  Boy, are you in for a surprise!

The reality

The problem is, to start with, the person asking for the loan, unironically does not have the exact thing needed to pay you back, i.e. The money.  They are in a difficult situation anyway, so the idea that the repayment will be slick & on-time is almost bordering fantasy.

I’m not saying that each and every single loan is never paid back.  But eventually you will come across this dreaded problem if you keep giving out loans. It is almost guaranteed.  When that day inevitably comes you will understand why you shouldn’t lend money in the first place.

It is not that the person is ‘bad’ per se, it’s just that people fall in to hard times, either by choice or circumstance, and such phases linger on for extended periods of time, making them default on financial obligations such as loans & bills.    

Once the date of the payment has lapsed, usually there will be no word from the person.  Your messages and calls will go unanswered.  Even if they do communicate with you, it would be to provide an excuse as to why he or she is unable to give the money back.  It would usually be someone else’s fault: “So and so owes me money and has not returned it…” or “I’m still to receive a payment for something, but still waiting for it…” etc.  But, as you can see, the bottom line is the same.  They did NOT keep their word, and now you’re left hanging.

The Aftermath

After a few days or weeks pass, each time you call and ask about it, the person gets more and more irked by you.  You are being seen as a greedy, money hungry, evil person who doesn’t understand a down trodden person’s plight. Never mind the fact that you helped them in the first place. That is irrelevant now, given the present context of things that are going on in his or her life. 

In turn you start hating yourself for giving the money and for being foolish enough to trust them on their word. With all the ignoring & excuses you get, you will get frustrated. Consequently, you will start developing a deep resentment towards this person and your rage will consume you from the inside. 

In the end you will HAVE to forget about it and let go.  Not just the money, but the relationship as well.  It was a hell of a ride from being an angel to a devil & then to calmness by finally parting ways with the idea that you will be getting your money back. At least you learned your lesson, we hope!  That is what you will be telling yourself, albeit an expensive one, only till the next episode comes where another person you know is in a bad situation and needs your help.  And you say, “yes! I can give you the money!”

Examining the real reasons for giving money

If you’re honest with yourself and really look inward for the answer you will get it.  You need to contemplate the reasons as to why you want to give money & help someone.

1. Yes, you want to help a friend or relation as they are going through a bad time.
2. You want to be the ‘good guy’ of the moment, the savior that has risen to the occasion. This is natural and works on a subconscious level.
3. You think that, that they think that, you are well off.  And you don’t want to, not be that person.  You want to come off as ‘the one who has’.  Your ego is pushing you to be dumb.  Remember, before the fall comes pride.
4. Essentially you are using money to be that good person, but want it back as well!  That sounds a bit strange, don’t you think?  I say this because, one of the main tenets for peace of mind is to never expect anything from anyone. And in this case, you are expecting exactly the same as you have given.  For this reason alone, there is a huge probability of being let down.
5. You forget that money is power & leverage.  And by lending money that is yours to another person, you are relinquishing them both by transferring that power & leverage over you to someone else.
6. You don’t understand that it is ‘your money’ only until the last minute that it is in your hands.  Once it’s in the other persons hands it is literally theirs.  It is ‘their money’ now.  This is important to remember as there is NO legal binding whatsoever to say that, that money is yours or that the other person owes you anything.
7. If you don’t believe me, try getting it back!  You will have to come up with excuses and reasons as to why you need the money.  Sounds familiar?  Yes, that is how they approached you initially. So, the dynamics have switched now.

What you should do the next time

When you are faced with this situation again, don’t think about how you are going to be the good guy by loaning money.  Try and see in to the future, and understand why you shouldn’t lend money to anyone. Just say that you’re as cash strapped yourself, as they are.  Humble yourself down enough to say this to the other person.  In a way they would probably be happy to hear that you all are in the same boat.  A bit of back and forth about how bad the country is being run by the ruling party, and they would move on to finding another person or solution.  You can continue with your day peacefully knowing that you dodged a bullet.

In conclusion

If you really want to be the good guy or girl, give without any expectations at all. It is much better to give away a small amount of cash rather than lend a huge sum of money. You would be happy, that you let go of something, and the person who receives it will be happy to receive it.  This is the purest form of altruistic giving.

You can read further on the topic here.

What do you think?  Do you agree with my points?  Or no?  What are the similar experiences that you have gone through?  Tell me in the comments section below.