I have always had a simple policy when it comes to lending money to friends. Any money I lend I never expect to see back. I give it and leave it at that. If the person happens to pay the money back, then that’s a bonus. I feel that this ensures that the friendship will never be affected by the money.
At one point I had my best friend from college ask me for a loan. Just knowing him I know it must have been a difficult thing for him to do and I decided that I would give him the money with no strings attached. He was making his way through medical school and had already maxed his credit on student loans. He just didn’t have any other place to get the money in a short period of time and so he turned to me.
He said he was willing to pay any interest on the loan. Instead of asking for interest, I said that all I expect is that when he became a doctor and a patient came to him and for whatever reason couldn’t pay, he should find a way to help them out. That was the “interest” for the loan.
The money was given about 10 years ago and it was never a subject that came up during that time ( a testament that my lending money to friends rules work well for me).
Then I received a letter from him that shows that many times when you do something good for someone, it comes back to repay for itself many times over. Here is the letter I received:
Many years ago I was in a financial “pickle”…as part of our agreement, I have been engaged in volunteer and philanthropic activities. Most notable is my involvement with two Foundations as a member of their Board of Directors. both Mile for Miracles Foundation and Kelsey’s Kids Foundation serve children in Colorado. They were started because both of these children had leukemia and they are patients of mine. Although the initial intent of the foundations was to be charitable for causes that are focused on childhood cancer, I have convinced the respective Boards that they should reach deeper. So now we have a multi-dimensional approach.
We provide funds for the education of fellows of Oncology at the University of Colorado School of Medicine, provide unrestricted funds for patient care to the Center of Cancer and Blood Disorders at the Children’s Hospital of Denver, fund under-insured patience, donate funds for unrestricted use to the Foundation of the Children’s Hospital, and most importantly require that a fixed percentage of each Foundation’s assets be dedicated to the communities that these children live in. To all of these goals we have so far been successful and hundreds of thousands of dollars have been raised for these purposes. Again, I can not emphasize how much you made this a reality.
I don’t know if there is a “correct” way to lend money to friends, but i think it’s important to come up with a plan that you feel comfortable with that won’t affect your friendship. If you can do this, you’ll find that when you do help others out, your help may go on to make a much bigger difference to a lot of others down the line.