Dear LPG, 

I recently read what GM had to say about her predicament when being asked about having a little extra money to lend to a friend. I note that she did not say what she did then, but I can hear so many of my friends, if asked the question, saying never do it.

At the moment, I think we all have to accept that times are hard, although that is a given if the question is being asked.  

I have to say that I fully understand her meaning when she said that her savings are just sitting there and, as long as she gets them back, there is no harm in letting someone else have the use of some of them, but being sure to get them back is the real problem.     

If you ever find yourself at a similar point, before you give any answer, there are many things to be taken into consideration, so, to me, it is essential not to give that answer straight away.  

How often has this person borrowed money before, not necessarily from you? It is something you might know about within a circle of friends or family. If there is a history, the next question is whether it was returned before the promised date. By the way, there has to be an agreed-upon date for its return before you start (Please!)   

Are you being told how long it will be needed before it gets back to you, were you offered a plausible reason for the need for the money, or did you have to ask why? While we are on the subject, it is worth asking about the lender's plans for returning it. Is he working or depending on getting some money from somewhere else before he can pay you back, and what if that money does not get to him?  

Another thing I have learned is that you should never offer the total amount you are asked for because that will give the borrower the idea that you have loads of money available for the future. When you get right down to it, I think that it depends on if you can afford not to get it back if it comes to that. 

I am not saying that anyone, no matter how rich everybody else thinks they are, has some money they can afford to give away, but some save well and have a bit put by. There are times when you have to remember the golden rule about putting yourself in the other person's place, and there are so many things to consider.

GM said she had been stung before, so I hoped that if she did make the loan, she would get her money back. 
And I also hope that she got a contract written and signed in triplicate; one copy for you, one to go with the money you lend and a third to be at least posted back to yourself as proof of the date the contract was made.

But the ultimate question will always be:

If I never see this money again, will my financial situation or friendship (or relationship) with the person I loaned it to suffer?

CS, Southwark

CS has found some loan agreement templates…

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