Is It Ever Okay to Help Friends With Money?

Helping your friends is a natural instinct, but when money comes into play, it can quickly get complicated. Money imbalances can cause some serious friction but lending to and repaying friends can make things even worse – especially if one of you can’t continue to honor a financial agreement.

However, given that money (having it, or not having it) affects almost every aspect of life, it’s not realistic to assume that friends will never discuss it, or that friends won’t want to help each other from time to time. In spite of the risks, helping each other could be an act that brings you closer together.

So what are the rules for helping a friend?

Seek Outside Help First

The first rule should be that you discuss other methods for solving the issue first. Though your friend might be desperate for a loan, this doesn’t mean that they have exhausted all options before they come to you. For example, though they may have been rejected for a bank loan, they may be able to apply for another cash fund from a peer to peer lending platform.

In some cases, the urgency of getting the money can be overwhelming. For example, if a friend required money for bail, they may not be able to seek a source of funds themselves. As bail bonds can be set high, it may be wiser for you to seek financial assistance from a professional bail bonds company rather than stump up the cash yourself.  

Set Down Clear Rules

If you do decide to lend a friend some money, you must first set down some clear rules. It’s a good idea to treat this situation with a bit of formality that might feel a bit alien in your relationship but should help to establish what is going to happen.

Rather than lending someone cash directly, it is usually better to pay off a debt for them and then set up a direct debit of monthly payments until the money is repaid. This is advisable for two reasons: first is that this guarantees that your friend uses the money appropriately and second, a direct debit means that the money is automated so unless your friend cancels the transfer, you won’t have to keep chasing them for payments.

Setting up your terms in writing in the presence of a lawyer might sound like overkill but if you are lending significant amounts then this is necessary to ensure the integrity of the loan.

Talk Openly

Lending or borrowing money from a friend is risky but if you do choose to do it then you must be prepared to talk openly to each other. Try to be specific about your needs. As a lender, you need to be clear about exactly when you need the money back and whether you will require installments over a period of time. As a borrower, be specific about what the money is for and how you plan to repay it.

Kindness and understanding is key here but practicality and pragmatism must be your main agenda.


Arnel Ariate is the webmaster of Money Soldiers.

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