How to Refuse Lending Money to Family & Friends

man asking for moneyOne of the most awkward things I have ever had to do was to ask a relative for money. I was about to graduate college, broke but debt free, and I desperately needed a car. So I asked a relative to give me a loan.

Yes, it was awkward, and to my surprise, she refused. While I know it was awkward for her too, she refused the loan in a way that made me feel like it was nothing personal. She knew why you should never lend money to friends or family. Instead of simply rejecting my request and leaving me to find an alternative solution on my own, she helped me find a way to afford a car.

Are you in a position where you need to refuse a loan from a friend or a relative? Here are several tips on how to refuse gently, while still helping your friend or family member.

How to Refuse a Loan Request from Friends or Family

1. Don’t Feel Pressured
Many people agree to these type of loan requests because they don’t feel that they can say no. You may feel like you’ve been backed into a corner with no way out, if your friend or relative is pushing you to make a quick decision. You don’t have to say yes, so don’t let the pressure get to you. Making the decision to refuse to lend money to friends or family before this becomes an issue will help alleviate the pressure.

2. Respond to the Request within 24 Hours
If absolutely necessary, tell your friend or relative that you need more time to think things through and that you’ll give him your final answer in 24 hours. This can make the decision easier, because you will have time to reassure yourself that you are doing the right thing. The extra day will give you time to gain the confidence that you need to form an articulate response. In deference to your loved one’s problem, and to ensure that you don’t build any false hopes, try to respond right away, if at all possible.

3. Be Firm and Concise
When you speak to your friend or relative, firmly explain that you’re not able to provide him with a loan. For example, “I’d love to help, but I’m just not in a position to lend you the money right now.” This is short and to the point and does not give your friend or relative much room for argument. If your friend or relative has your best interests at heart, this should be the end of the discussion.

4. Don’t Make Promises You Can’t Keep
Once you’ve decided that you won’t lend money to friends or family, don’t beat around the bush. Make it clear that you won’t be able to lend any money; don’t try to let them off gently by stating that you may be able to give them money next year or at some point in the future. If you hint that a loan might be possible “someday,” you’re really just setting up that person to repeat the same awkward conversation with you in the future.

5. Don’t Make Exceptions
If you really and truly don’t want to loan money to friends and family, you can’t make any exceptions. Loaning money to one relative, but refusing to loan money to another relative, could cause potential conflict within the family. Stand firm and don’t back down from the decision not to lend money to friends or family, even just this “one” time.

Things are a bit trickier if your friend or relative knows that you do have extra money to spare. In this scenario, you could say that while you have the money right now, you may need the money in the not-too-distant future. Stress that this money is your emergency fund to protect you against unexpected expenses. If you’re worried about looking selfish, you can also explain that you don’t want this loan to make your friend or relative feel guilty if they can’t pay back the loan.

asking hands money

Alternatives to Loaning Money

Once you’ve established that you can’t provide the loan, don’t just leave your friend or relative in a hopeless situation. Instead, open his eyes to some other alternatives:

1. Help Review Their Finances
To help soften the blow, offer to help your friend or relative take a look at his finances. This way, it’s clear that you want to help. There may be a way for your friend or relative to avoid getting a loan. Calculate income and expenses, and see what can be cut from the budget. Determine if a more manageable repayment plan is an option for current debts due. Also, suggest making a budget to help keep friends and family members within their means, so that they won’t need to borrow money in the first place.

2. Suggest Alternative Ways to Earn Income
Perhaps your friend or family member needs to make more money to pay for unexpected expenses. If that’s the case, suggest alternative ways to earn extra income by coming up with some side business ideas. If someone is artsy, recommend that she sell crafts or jewelry on Etsy. Or recommend fun or unusual part-time jobs, such as a casino dealer or caterer.

3. Suggest Selling Personal Items
Selling some personal items to get extra cash is another way to earn income. When you refuse the loan, offer to help your friend or relative go through their old things and have a garage sale. If you are computer savvy, perhaps you could help your friend or relative sell items on eBay as well.

4. Suggest Alternative Loans
Don’t suggest to someone an alternative loan unless there is no other way to sort out the debt. If this seems to be the only option, there are some great peer-to-peer lending companies online, such as Prosper and Lending Club. Depending on your friend or relative’s credit history, it’s possible to obtain an unsecured loan for a good interest rate from one of these websites. The guidelines they use are much less stringent than a local bank’s guidelines.

5. Give a Gift
Does your friend or relative have a birthday approaching? Consider giving a cash gift this year. The gift will be appreciated, and you might feel a little better about refusing the loan.

6. Co-sign for a Loan
If you feel like your friend or family member represents a good risk, consider co-signing a loan. By doing so, you make the agreement between the two parties much more legitimate, and they have a real incentive to pay back the loan. Keep in mind though, as the co-signor, you will be responsible if the other person cannot meet the loan obligations. Thus, only consider this option if you feel confident that the other person will be able to pay back the loan.

Don’t Feel Guilty

You’ll probably feel guilty about not lending money to a friend or relative, but you need to get past this feeling to successfully reject the loan request. It’s not your fault that your friend or relative is in a financial mess, and there’s no law that says you must give up your hard-earned cash to help someone else.

If you can’t afford to help or don’t want to help, you shouldn’t feel guilty. Once you have provided valid reasons for refusing to lend money to someone, it’s up to your friend or relative to accept this and move on.

Final Word

There’s no reason why refusing to loan money to someone you care about has to get in the way of your relationship. If you’re upfront and honest about why you can’t loan friends and relatives money, and if you offer to help them find alternative ways to eliminate their debt, the relationships should still remain intact.

Have you ever refused to loan money to friends or relatives? What was the experience like and what did you take away from it?

  • Skirnir Hamilton

    This is a really hard thing to do. My husband and I have the policy of making no loans to family or friends, but it is hard to explain it to my dad and my mom as they are divorced for many years and neither make well. My dad spends money like it grows on a tree and has always had money given to him by his mom until she passed away and never really learned anything about money. I do feel bad not helping him, but how can I give him money when I know it won’t do any good, until he gets his spending under control? My mom, on the other hand, spends better, but has a limited income as her husband, my stepfather, is retired and not doing as well physically as he used to. But they never saved any for this contingency over the years. It still doesn’t seem like I should swoop in and help them, and how could I help them and not help my dad? So I just say I have a policy of no loans. I try to help by giving a gift card they can use or a check for Christmas and birthdays, but that is about it.

  • Martin

    Don’t feel guilty about not lending money to either family or friends if those people cannot manage money. I learned that lesson a long time ago when I was a kid. Just about every person that bugs you for money is like that. They tend to have no moral compass and appear to never feel bad about not paying your back. I remember what my mother told me after I complained how I was never being paid back. She said to ‘cry poverty’ the next time it happens. Since an early age and continuing today, if I am ever asked for a loan, I simply say ‘I don’t have any money to loan you’. It does not bother me that they believe I have the money anyway. I know a family member who never managed money and totally was dependent on her father to rescue her anytime she needed money. The father spoiled her. She never paid back anything. After her Dad died, for the first time in her life, she started managing money. Why I am mentioning this is an example that people who bug others for money can learn money management skills if they have to and stop bugging other people for loans that will not be paid back.

  • Cassie

    Making the decision BEFORE you are asked makes this much easier. Our family has a rule –we don’t loan money. We value our relationships and loaning money puts those relationships at risk. We may give money to friends or family as we can afford but we don’t loan.
    I loved your alternatives to loaning right up until number 6. People only need a co-signer because there is a good chance they will not repay. If you co-sign you are risking your money and the relationship.

  • Kaydiane57

    I have made a loan to long time friend of 36 years, but not without an” I owe you” statement, signed by the person requesting the loan. She was really suprised that I would even suggest such a thing until I explained: What I said was, If she dies, I would have no recourse retreving my money from her family as I would have no proof of the loan. That was the end of story. I gave the loan & was paid back at the time stated in the” I owe you!”
    I felt uncomfortable at first, But got over it, I work hard for my money!!!!

  • sam

    I never ask to borrow money unless basic survival is at risk. I expect the same from others.

    When you ask to borrow money from family / friends … what they are asking is that you put THEIR interest ABOVE YOUR OWN.

    Unless their situation is dire, such as basic survival … you can be certain THEY would not do the same for you. WHY? Because they have some belief that their concerns are more important than yours.

  • Darcy

    I always am on paycheck to paycheck with a full time job and debt management. I was always willing to lend a friend some money frequently however I knew a friend with a teen has no job. A friend always tries to find a job but hard to find one. A friend has a SSI. Regrettably, I told her not to pay back when every time problems comes up unexpectedly. So many years, she came to me for lending and I did. This time I told her I am not able not to lend this time. She thinks I lie about having extra money to lend because of biweekly paycheck. She refuse to accept No from me that there is no more lending. I have to get my money problem together first before I think about lending. she keeps calling about money but I am so tired of saying no or not to answer her phone. Point is that you do not lend friends whose have no jobs. she would point out money is for her kid and it did usually for her kid. But I couldn’t do it longer. I have no problem to lose a friend who still refuse to accept No lending.

    • Pickley

      My friend had the nerve to get mad at me, too. I told her no because I had to have a small medical procedure done. Shes selfish.

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  • Sandra

    I have relatives who keeps borrowing money and get hurt when I reject them. I have money to lend though but got tired of giving them favor when I don’t see them working hard for themselves. They will have tons of promises saying they will pay back but the moment they receive the money They become quiet as if nothing happened and never think of the responsibility of paying. It hurts. It sucks.

  • Pickley

    I never loan money; I only give it. But I dont give loans for things like rent or bills, or anything short a person potentially starving. this kind of loan should be no more than $100 usually. And yes, i gift it. I dont expect it back.

    Anything else is not really urgent, in my opinion. If youre about to lose your house, me giving that person will likely only delay the problem. That person will be broke again and will not be able to pay me back. That person will just have to recover from the loss, and I know its hard, but im not wealthy enough to take a financial hit for someone else.

    I do have one friend and shes always hitting me up for small cash loans. I gave her a couple, but now, I just I dont have it. I cant affors it. Shes even tried to get me to cosign accounts and help her rent apartments. I just my credit wont do it, but in truth, my credit is good.

    Still, its quite annoying. I dont know why she thinks her actions are okay.

  • frank

    People are always backing me into a corner to “lend” them money but I have taxes and bills to pay as well as a house to fix. They are always traveling and giving money to other people. Sick and tired of it so when askef for money I say I dont have any. These a**holes cant manage their money and dont care about me.

    • mlyffe

      I totally understand they pressure and guilt you into it and when you finally say “no” it’s like you’re the bad guy!

    • Sterling Archer

      My brother is the same way. If I say no, it’s not because he has no clue how to manage his money and it’s because I’m “being cheap”

  • mlyffe

    I really try to help when I can but I realize it’s a very short-term fix as in the end it only defers the inevitable. My family thinks we have a pot of gold from which to disburse funds from. My spouse and I are savers, moreso out of necessity. We have family and financial obligations of our own but there’s that annoying guilty feeling that makes us cave in time and again. We have stopped loaning and only giving what we can part with. We still believe it is better to give than receive but don’t like being taken advantage of. We’re really trying to pay down our mortgage and have started gifting smaller amounts and have noticed some major changes in attitudes of the receivers.
    Good riddance!

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  • zack

    I agree with everything in this article EXCEPT “Co-sign for a Loan”. If you do just a few minutes of online research you will find that 99.99% of financial advisors, financial experts, financial gurus and just plain folks ALL highly recommend that you NEVER consider co-signing a loan with ANYBODY, even if you think that they are a “good risk”.

    Here’s why

    1. They may be a “good risk”, but unfortunately, even good, Wonderful people with Fantastic credit can have bad things happen to them such as job loss, economic downturn, sickness, bankruptcy and other difficult financial situations. Why put yourself at risk?

    2. Co-signing for somebody else’s debt will affect your ability to get a loan, the loan that you co-sign is considered by lenders to be your debt as well.

    Probably the one situation where people co-sign the most is a car or a house for their child. It’s probably just as easy to finance to the car or house yourself for your child and set up a plan where they pay you to “buy” it from you, that way you own it and have full control of the loan while they are “buying” it from you. If they don’t pay you, at least your credit is still intact and you can get it back since you legally own it.

    There are good Federal student loans that do not require co-signers, the student should take out the loan in their name only and if you want to help them pay it back they will be grateful if you do help, but you will not be legally committed to paying it back.

  • Sterling Archer

    I can tell you’ve never dealt with my family. From an early age my brother never learned to manage his finances, and he was always begging me for money. Every day when we were in school it was “Can I have a dollar? But I wanna dollar! Give me a dollar!! You’re cheap!!”. He’d constantly PILFER money that I had set aside. I had fifty bucks in a drawer once, and it was disappearing a few bucks here and there. I thought “well… I must have spent it on something”. Then one day the remainder of it was gone. When I confronted him he admitted to taking it saying “You don’t understand!! When I see money, I’ve gotta spend it!!”. Then there was the constant begging to borrow small amounts because he didn’t “feel like going to the ATM”. He’s begged me to borrow $5,000 to buy a Jaguar to which I said “I am not giving you five grand to BLOW on a Jaguar”, which was met with “STOP BEING CHEAP!!”.

    About three years ago I made the mistake of letting him borrow four grand to save his house because he was going through a divorce. The last bit I held up and said “this represents one month’s pay. I have worked the last month for YOU’. He said, I kid you not “So, it’s not like you’re not getting paid again”. I was laid off the very next week. About a year later he wanted to borrow ANOTHER $1,200 to buy a twenty year old Mercedes C320 with 210,000 miles on it. I said “No, you already owe me four thousand dollars, the bank is closed”. He said “So?”. To which I replied “You want to owe me FIVE THOUSAND? That’s better?”. Again, it was more “STOP BEING CHEAP!!”. Meanwhile he goes to basketball games, and buys expensive sneakers at well over $100 a pop. His latest plan was to rent the Chase Skybridge at the Garden for a guy’s night a Knick game.

    He never learned to manage his money because he wants to live big, and doesn’t have the means to back it up. It’s more important to him to have the Mercedes that’s falling apart so he can impress his friends, rather than having a dependable vehicle.

  • 0bsoleteMan

    #6 is absolutely horrible advice. You should never under any circumstances cosign a loan for anyone, ever.

  • Sherrry

    I completely agree!!! I cannot believe this advice was allowed. Setting so many people up to be taken.

    I have a brother in law that actually tries to bully and bum rush his brother with constant money begging and schemes to get his credit card and borrow his car. “Tell your wife it’s none of her “biznes” and “I’m family. I’m your big brother..what the *#*%” his ex told us he gambles drinks and drugs his money away when he holds a job for short amounts of time. He really feels entitled and the world should take care of him. I wish he was the only begger but the rest have been put in their place. Not letting this toxic person disrupt my life.