Steps to follow before Lending money to friends.

Posted on Posted in Personal Finance Advice

I have been fighting back writing a post like this. This issue was almost starting to eat me up so I finally decided to write about it so as to let some steam off. I have also decided to stop fretting about it; rather I will remain calm, learn one or two lessons from it and wait to and keep hoping for the best.

I had a similar experience while I was in the University but apparently, that did not teach me enough lessons as I have fallen victim again.

I lent several thousands of Naira, almost half a million to a good friend of mine. She came up with a very touching story and promised to pay back within 3 days in full, well 3 days has turned to 3 months. Not a kobo has even been paid as part payment , and all I keep getting from her are stories that touch the heart. Right now, I can’t reach her and she is off every social media.

What is most painful to me is that I lent her from my emergency funds. I do not keep money in cash form, so the only way I could meet her need was to empty my emergency funds account for her. Emergency funds are not to be touched except for emergencies, but I did what I did because I trusted her and, ‘ A friend in need, a friend indeed’.

“Neither a borrower nor a lender be, for loan oft loses both itself and friend .” These famous words came from Polonius, Shakespeare’s chief counselor to King Claudius in Hamlet.  Polonius knew that a loan to a friend or family member often results in the loss of both the money and the relationship.

A loan to a friend does not always have to end in the loss of both the friendship and the money. Some have advised me that I should never lend money to a friend again, but then what are friends for, if we can’t help each other?

I have learnt a few lessons and I have drawn up new set of rules that I will use before I lend money to a friend.

  • Remove all sentiments and think properly: I got overly sentimental and didn’t analyze the whole situation, because looking back now, her stories from the start did not add up. Before you lend to a friend, think well. Financial stress can turn that dear friend of yours into a little liar. My friend played a fast one on me because she knows I can be very sentimental.
  • Do not trust anyone: I trusted my friend too much. I still can’t believe that she played on me because I have known her for over 7 years. Well, I have learnt in a hard way never to trust anyone. People change over night dearies.
  • Lend money from your excess  cash: By cash here, I mean disposable income. Do not lend from your savings or emergency funds like I did. Let your savings be your savings, let your emergency funds be for your emergencies. If I had applied this rule, I won’t be wallowing in pain now because I won’t have had any cash to lend in the first place. Now I have to start rebuilding my emergency fund account. I believe God for a miracle.


  • Know where your borrower lives : It dawned on me that I knew not my girlfriend very well. They had moved houses in May this year, and I kept promising to come visit her at their new place. Well, she is not willing to invite me over again for fear of harassment I guess.


  • Re-confirm the employment / business status of the borrower : Do not be too quick to lend, carry out an independent check. Is he/she still at his/her place at work? Is his/her business still up and running? I was met with a rude shock when I learnt that my friend had been on suspension at her place of work for about 2 weeks prior to when I lent her the  money.


  • Have an agreement: Don’t be too casual when lending large sums of money. Have a proper agreement that will state terms of payment. If possible, let him/her give you a guarantor. In my case, I contacted my friend’s hubby, and he told me politely that he was not initially involved in the transaction and does not wish to be disturbed again.


  • Give rather than lend and if lending, lend only an amount you can afford to lose: If you get paid back, hurray; if not, at least you will feel good that you helped a friend. I always apply this rule, sadly I threw it into the winds that day.

Finally,  It’s okay to politely say no and do not feel embarrassed about it.

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