• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Home
About Us Contact Us Advertising
Articles
Budgeting Debt Frugal Insurance Investing Making Money Retirement Saving Money
Tips
Money Saving Tips Trash Audit
Make Money Forums Blogs
Create a Blog Control Panel All Entries All Blogs
Tools
Calculators Prescription Drug Coupons Online Savings Accounts Test Your Knowledge Financial Directory Credit Cards

SavingAdvice.com Blog

Bridging the gap between saving money and investing

Subscribe

 

Join Now or Login

  • Home
    • Advertising
  • Tips
    • Money Saving Tips
    • Recycle, Reuse and Repurpose
  • Make Money
  • Credit Score Guide
  • Forums
  • Blogs
    • Create a Blog
  • Tools
  • Financial Basics
    • Back to Basics: Saving Money
    • Back to Basics: Beginners Guide to Retirement
    • Back to Basics: What Every Child Under 10 Should Know About Personal Finance
    • Back to Financial Basics: Investing In Stocks

The Right and Wrong Way to Borrow Money from Friends (Without Drama!)

March 11, 2025 by Teri Monroe
Borrowing money from friends
Image Source: Pexels

Borrowing money from friends can be tricky, often putting a strain on relationships if not handled with honesty and clear communication. Few things are more uncomfortable than chasing down a friend who hasn’t repaid a loan. However, by following a few simple etiquette rules, you can navigate these situations smoothly and avoid unnecessary drama.

Should You Borrow Money from Friends?

Sometimes borrowing money from friends and family is the best option for your financial situation. You may not have the credit score you need to qualify for a loan. You may have an emergency expense where you need funds quickly. Regardless of your situation, when you borrow money from friends, there are clear do’s and don’ts to maintain your relationship and avoid drama.

Be Transparent

Tell your friend exactly why you need the money and what you intend to use it for. Being vague about why you need the loan may make it hard for your friend to agree to the loan. Try not to make excuses, but instead be honest and upfront. It’s also important to consider the other person’s financial situation before asking to borrow money from them. Don’t put your friend in a tough spot if they can’t afford to lend you money. You also shouldn’t guilt your friend into lending you money. If they say that they can’t give you a loan, don’t pressure them further.

Create a Loan Agreement

Create a loan agreement when borrowing money from friends
Image Source: Pexels

Just like with any other loan, borrowing money from friends should come with a loan agreement. This should include how much is being borrowed, when it will be repaid, and if any interest is being charged. There should also be mention of what happens if your friend fails to pay. While a signed agreement may seem unnecessary between friends, it will protect both parties in the long run. If you are borrowing a larger amount of money, you may even want an attorney to draw up this agreement.

Keep Your Promise to Repay

If you are borrowing money from friends, make sure that you are able to repay the loan. It’s important to discuss how they would like to be repaid, for example through Venmo, check, or cash. Then, you’ll have to budget accordingly so you don’t miss any payments. Remember, if you value the relationship with your friend honoring your promise to repay them is paramount.

Consider Tax Implications

If you are borrowing a large sum of money from friends, there may be tax implications to consider. Loans between friends and family can be taxable for both parties. If the value of the loan exceeds $10,000, any interest payments may be considered taxable income. Additionally, if a loan is forgiven, it may be treated as a taxable gift. It’s important to understand the implications of your loan so that there are no surprises for you or your friend.

Have you borrowed money from friends before? What was your experience like? Let us know in the comments.

Read More

Dave Says: Preparing for the Future

How to Beat Inflation – 10 Actionable Tips

Teri Monroe

Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.

Reader Interactions

What did you think about this article?
1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading...

Comments

    Leave a Reply Cancel reply

    Your email address will not be published. Required fields are marked *

    Primary Sidebar

    • Articles
    • Tips
    • Make Money
    • Credit Score Guide
    • Forums
    • Blogs
    • Tools
    • About
    • Contact

    Subscribe to Our Newsletter
    Thank you for Signing Up
    Please correct the marked field(s) below.
    1,true,6,Contact Email,21,false,1,First Name,21,false,1,Last Name,2
    Copyright © 2025 SavingAdvice.com. All Rights Reserved.
    • Privacy Policy