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What to Do When a Family Member or Friend Won’t Pay Back a Loan

By Casey Slide

friends fighting moneyHere is a common scenario: a friend asks you for money for the down payment on a car and promises to pay you back as soon as he can. Being the loving and caring friend that you are, you immediately loan the money, confident it will come back in due time. After all, you’ve known your friend for years and trust him, and you wouldn’t expect any less.

But as the months go by, you still don’t see a dime come back. You are nervous about asking for the money, but you really need it back. Yet, you don’t want to harm the relationship.

So what do you do? How do you get your money back and maintain the friendship? Here are nine ways to deal with a friend or family member who won’t pay you back.

Ways to Get Your Money Back from a Friend

1. Offer Gentle Reminders
Sometimes this is all it takes. Perhaps the person has so much on their mind that they forgot about the loan. Consider sending an email or visiting him. If your friend or family member has a good sense of humor, make a joke out of getting your money back. Humor can lighten the mood. However, make sure you communicate how important it is to you to be repaid.

2. Suggest a Payment Plan
If your friend wants to pay you back, but cannot pay the entire lump sum at once, suggest a payment plan. Sit down with him and write out the terms and conditions for the payments, including how often and how much. Establishing structure to the loan will benefit both of you. When deadlines are clear, it’s easier for your friend to be held accountable to them.

3. Offer to Help Figure Out Finances
If your friend or family member is willing, help him review his finances. If he does not manage money well, suggest that he make a budget or help set it up. In this way, you both can see how much he can afford to pay you back each month. Suggest the envelope budgeting system if it looks like he is having a difficult time staying within budget.

4. Barter
If it seems like he will never have the money, consider a different approach. Trade a specific amount of work around the house or in your yard for what he owes you. Or maybe you own a business and could use some extra help there. This can be a great way to let him off the hook for the money, but still get something of value in return.

Try this approach out first, however. If your friend is horrible at housework and you trade for an hourly amount, you may not feel like you got your money’s worth – which could leave lasting resentment in the relationship.

Alternatively, if he has an item that is roughly equivalent in value to what he owes, tell him you’re willing to wipe out the debt if he’s willing to part with the item.

5. Hold a Joint Garage Sale
If your friend or family member is unable to pay you back and is very tight on both money and time, ask him if they would donate some of their things towards a garage sale. The conditions would be that you get the entire profit, but they would be free of the debt. It’s best if you first approve, and then take charge of pricing and selling the items, so you don’t feel ripped off.

6. Get Collateral
If your friend or family member truly wants to pay you back, but lacks the discipline to do so, ask for collateral. Something he won’t want to do without, like a TV or iPad, can be a good choice. You are not to return the item until he pays you back. Such an action gives him incentive to pay you back sooner and proves to you that he genuinely intends to follow through with the promise.

7. Visit in Person
Perhaps your friend or family member is avoiding you because he knows you want your money back. If he doesn’t respond to emails, texts, or phone calls, visit him in person. Be kind when you visit. Show him that he can’t avoid the situation and offer suggestions that he can implement to pay you back.

8. Have Them Pay for You
If you are on friendly terms, ask your friend to pay for you each time you go to lunch or the movies. This could be an easier way for him to pay you back, and it might be a nice perk for you as well.

9. Gift It to Them
If never getting the money back isn’t going to ruin your life, consider gifting the amount. You’ll probably feel good about it and then you can move on. Giving is great for the soul and allows you to be a good steward with your money.

As for the gift, there is a slim possibility you can deduct it on your taxes, but it depends on the scenario. The loan would need to be set up as and considered a true loan turned non-business bad debt. More than likely, you will not be able to count the gift as a tax deduction, but I recommend contacting the IRS or checking out their website. These sorts of gifts are closely scrutinized, and depending on the value of your gift, you could even end up owing gift tax. Gifts in excess of $13,000 are liable to be taxed and the donor is the one who pays this tax. Gifts for charitable contributions, for medical or educational expenses, to a political organization, or to your spouse are not assessed this tax.

friend pulling money

Maintaining a Good Relationship

Loans can ultimately sour relationships, and many friends and families have fallen out over this issue. Here are some ways to deal with the relationship as you are attempting to get repaid.

1. Be Patient and Forgive
Try to be as understanding as possible. This person may not be as financially responsible as you and may need some guidance to pay you back. Use the situation as an opportunity to help your friend develop financial responsibility. Do your best to not get bitter over the money. If the person doesn’t pay you back, let him know your frustrations, but ultimately forgive him and move on. In the end, it will save your relationship and keep you from being an angry person who lost a close friend.

2. Think About How Much Your Relationship Is Worth
Is your relationship with this person worth a hundred dollars? A thousand dollars? A million dollars? Is it priceless? Keep that in perspective as you continue to deal with the situation.

3. You Can Only Control Yourself
You are only capable of controlling your own actions. If this person does not pay you back, that is on his shoulders and not yours. Don’t let it bring you down or ruin your life. Ultimately, it is a learning experience for both sides.

Final Word

It is often not a good idea to loan money to friends or family members. However, if you’ve already done the deed and find yourself dealing with it, make the best of the situation and use the tips above to try to get your money back and save the relationship. Chances are, your friend doesn’t feel very good about the situation either, and if they’re avoiding you, that’s probably why.

“Help them help you” is the message here. Have compassion, and whatever you do, don’t condescend because they owe you money. Definitely deal with your ego if you think this position makes you “better” than they are. They will pick up on these feelings which could harm the relationship irreparably.

Have you loaned money to friends or family members? What was your experience like? Have they paid you back yet?

(photo credit: Shutterstock)

Casey Slide
Casey Slide lives with her husband and baby in Atlanta, GA. She graduated from the University of Florida in 2005 with a bachelor’s degree in Industrial Engineering and worked for a prominent hospital in Atlanta. With the birth of Casey’s son in February 2010, she decided to become a stay-at-home mom. Casey’s interests include reading, running, living green, and saving money.

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Comments

  • http://pulse.yahoo.com/_FVIKWKXA2XO6YECZKBMZLURLXY Martin

    When I was much younger, I remember loaning money to a friend and never getting any money back. It soured the relationship. Since then, I never have done that again with friends or family members. Either I hardly ever might give them money or most of the time I just ‘Cry Poverty’, even though I know they know I could do it if I wanted to. Crying Poverty like ‘I don’t have any cash available, have other expensive problems to deal with, don’t have it’, etc does the trick. I found that most family/friends who bug you for a loan, in just about all the time, themselves cannot manage money and it is very doubtful you will get anything back. In a rare situation like, someone getting all their stuff stolen in a foreign country, I will gladly give them some money and never expect repayment. I had that happen to me when I was very young and too trusting of strangers. Some very nice people from New York let me eat with them for a few days at a foreign campground. Right before they left, they gave me a very small amount of cash. I got their home address and I swore I would repay them for everything they had done. The way they responded then was in total disbelief. I shocked them a month later after I got home(after my parents were finally able to wire money to me overseas) and sent them the full amount plus some and they were so appreciative. They admitted they did not expect this and thanked me profusely. Most other people though would never do that and you should not expect repayment. That is why I still ‘Cry Poverty’ in most situations.

    • Deborahshampooch

      yes i agree with you. i loaned my nephew £2.500two years ago for a car loan and nothing as been said about it since. I feel its gunna cause a lot of friction asking for my own money which i had to work very hard for back.

    • Deborahshampooch

      yes i agree with you. i loaned my nephew £2.500two years ago for a car loan and nothing as been said about it since. I feel its gunna cause a lot of friction asking for my own money which i had to work very hard for back.

  • http://www.goberich.com Ross @ Go Be Rich

    Yup, no lending out money to friends or family for me. If on the off chance that someone is really, really in need or something crazy has happened and they need some cash right then and there, I might consider simply giving them the money and not expecting any of it back, but that would be about the only way any of my friends or family would end up with my money.

  • MrsUnhoMofo

    We sold a truck to a friend for $1000. He was susposed to pay it back in 5 weeks. 8 months later we still haven’t been paid back. Odd how he has the money to go to the fair and run off to have a fun weekend in the city but you can’t pay back a “friend”… Hope you had fun at the fair we couldn’t seem to fit it into our budget. Oh and your taking your daughter to the city to go shopping for school clothes that must be nice I went to a yard sale and picked my daughter up 5 pairs of “childrens place” jeans for less than you will spend on gas.
    We will never loan anyone money nor will we sell anything to a friend, family member, or co-worker ever again!

    • mrs teapot

      When someone says for months “oh I can’t pay you back for this that and the other reason” and then they go out and buy a brand new pedigree puppy (which they bragged about how much it cost), you start to think you will never see that money again :(

  • Anonymous

    The best idea is to avoid the whole problem. Neither a borrower nor a lender be, especially when friends and family are involved. My younger brother used to borrow money and I almost never got it back. Finally I told him I wasn’t going to loan him any more money. I told him if he really needed money and it was within my means, I would give it to him. He never asked for money again. I guess he was not being honest with himself when he said he would pay the money back, and then had guilt feelings when he couldn’t get it together to pay me. In his eyes he could ask for a loan and turn it into a gift, but he couldn’t just come right out and ask for money,

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  • CCameron

    I asked a true friend to look after a stash of money for me due to complications with my long term relationship. He said he would and would’t touch it once in a savings account until I was ready for it. Months later he was unemployed and due to a mix up a small amount was paid for a bill. I agreed it was OK for the time as he said he would pay it back as soon as he could. 2 years on, no mention of my money but we had our usual friendly chats and texts where he would go bars and clubs. I started to think about my money. I moved house on my own with two children and ask for my money by e-mail. almost two months later he replies to say he was unemployed again and how do I expect him to pay back??!!
    Disgusted and may have to take legal action if I am not paid back, even if it’s monthly payments it will help me to keep my home going for my children. Never lend, never borrow. I’ve learnt the hard way.

  • CCameron

    I asked a true friend to look after a stash of money for me due to complications with my long term relationship. He said he would and would’t touch it once in a savings account until I was ready for it. Months later he was unemployed and due to a mix up a small amount was paid for a bill. I agreed it was OK for the time as he said he would pay it back as soon as he could. 2 years on, no mention of my money but we had our usual friendly chats and texts where he would go bars and clubs. I started to think about my money. I moved house on my own with two children and ask for my money by e-mail. almost two months later he replies to say he was unemployed again and how do I expect him to pay back??!!
    Disgusted and may have to take legal action if I am not paid back, even if it’s monthly payments it will help me to keep my home going for my children. Never lend, never borrow. I’ve learnt the hard way.

  • Misscheese

    In 2008 aunt and i decided to save money which we were planning to share at the end of the year. She suggested that since she had an account that could give a better interest, we should deposit money into that account which we could share at the end of the year. Now, 3 years later, she is not saying anything and when i ask about the money she says i will get it but nothing happens. What do i do

    • Casey Slide

      Consider asking her to get you the money by a certain date. Perhaps you could say you need it to by for x, y, and z. Try to get a deadline from her of when she plans to pay you. If she doesn’t pay up by that date, you can get a little more aggressive by really drilling her about what is going on with the money.

  • Juls Kim89

    I need some serious advice, any help would be greatly appreciated. My family lent over 200K to a family friend for a business venture some years ago and got some hand-written signed documents promising they’d be payed back. Now after years of tearful calls (we moved to a different state), they’ve just told us they’re filing for bankruptcy. What legal actions can I take?

    • Casey Slide

      I am not a legal expert so I can’t give you any legal advice. However, I would advise that you speak to a lawyer who would be able to better guide you. I’m so sorry to hear what you and your family are going through. Good luck!

    • [email protected]

      I am in the same Boat as you. I loaned a so called friend 60 grand and he said he declared bankruptcy. Only true low lifes would borrow money from a friend and declare bankruptcy

      • Wrong move

        ATW and Juls, what did you guys end up doing? I am on the same boat and there is nothing you can do about it. Bankruptcy system is a little messed up, i can see why people would plan to borrow a bunch of money and declare bankruptcy.

  • http://www.facebook.com/bossman517 Corey Bledden

    I loaned 2k to my brother and his wife they promised to pay in full on a certain date that day came and they said they didn’t get paid I said ok Ill work with you since then it has been weeks of avoidance I wrote him and said they needed to pay me or figure something out even call me would suffice but he returned the message saying not to contact him and give him an address to send a money order and he tried to degrade me and make me seem like a horrible person for wanting to get paid back I wrote him back telling him I’d prefer the money in person he replied I already paid you back I wrote how and when did you pay me back and that was the last I heard from him I have been waiting checking my mail box but nothing yet since it is in writing to not contact him should I hire an attorney to resolve this as I do not want harassment charges

    • Casey Slide

      It’s probably not a good idea to hire an attorney to get back 2k. While 2k is a lot of money, it is not enough to justify lawyer’s fees. I’m sorry, Corey, because this does not sound like a good situation. You may want to consider the money a gift so you don’t risk making matters worse at the moment, and hopefully your relationship can be restored once the situation cools off.

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  • http://profile.yahoo.com/FZZLCRN5SOCUZZAJKWUTXLQ6KQ Zoe

    My husband loaned his mother $8000 without my consent. This woman lives on a fixed income, filed bankruptcy, and refuses to get a job. Well needless to say, she has not followed through with her payments. My husband would rather fight with me about it rather than holding his mother accountable for the loan. Meanwhile his mother spends money on frivolous things and then runs to my husband with excuses as to why she can’t pay. This whole situation has caused nothing but arguments and has damaged my marriage. We have debts that need to get paid and that money should never have been loaned out to begin with. I have been documenting her excuses and payments/non-payments for the past 3 years. She still needs to pay $5000. I am beyond furious since basically I’m working 40+ hours a week to pay for someone else’s crap and I’m sick of it. My husband thought that he was helping, but all he is doing is enabling. His mother will never learn the value of the dollar and how many hours of work is required to pay for things in life. Loaning money should never be done. People are not banks!

    • Casey Slide

      I think you hit the nail on the head when you said he is enabling her. That is often what happens when giving loans, but not always. Good luck getting your money back and with getting your husband on the same page as you.

  • Shangey G

    I’ve met a friend from a program I was in. We’ve been going out to eat every week or so, and somehow I always get stiffed a couple bucks here and there. I’ll put more on the bill or tip. Or just today, as we got to the register after ordering 2 desserts she pulled out 3 cents and a dime and said “that’s all she had”, which made me wonder why she agreed to split a dessert.
    I’ve gotten advice from a couple of people, including my mom, who have told me to “feel good about helping her out”. I feel like i’m being used and a sucker. I am a guy, but i’m gay. So this isn’t a matter of “the guy should pay for the woman” kind of thing. If I wanted people to “use” me and give away money and get chipped away a dollar or 2 every time I meet with someone, I’d like to have a young gay guy do it to me. At least I’d be thrilled he’s “using” me.

    • Casey Slide

      While your mom is right that you are “helping her out”, you are also enabling her. If she has done this once or twice, let it slide, but it sounds like it is more. If she is using you, you are allowing her to do it instead of helping her find ways to deal with being short on cash. Maybe talk about ways you earn extra money or something that may indirectly inspire her to work on earning more or saving more. Help her to be better with finances by discussing what you do with yours. Good luck!

  • http://pulse.yahoo.com/_AGIMZ7MMGB6JK5BQ7BQTWZPLWU ZaidiB

    I’m stuck with a hotel bill my aunt, who has dementia, and her husband, a few years her junior, left me on their recent visit to see me. I booked a hotel room for them, and upon checking in, they failed to reverse the charges onto their credit card. Being that my aunt has dementia, I chose to deal with her husband, who begged off each time I broached the subject. This constrained the happiness of their visit, so to cut my losses, I returned the car I rented to drive them around town, and told my aunts’ husband to arrange a shuttle to take them back to the airport when they check out of the hotel. Now, after their visit, my aunt has no recollection of any of this, except, according to my brother, only a vague awareness of a conflict between myself and her husband. I love my aunt dearly, but have only disdain for her husband, who showed his lack of character by trying to stiff me on the hotel bill, which was for $572.00. What can I do to get my money back, without straining the relationship I have with my aunt? My brother plans to talk with him, and promised to get back to me. I plan to mail a letter to remind them of their obligation; and If this fails, send them a letter of demand, with a threat to seek legal action. I’m depressed about this, partly because I allowed it happened, and partly because I feel that I’ve been played. What can I do to get my money back, and/or my piece of mind?

    • Casey Slide

      That does not sound like a good situation. If it were me, I’d suck it up and gift the money. The relationship with your aunt is too important. Seeking legal action would be very stressful for all involved. Just take this as a lesson. Overall, gifting the money will give you more of a peace of mind than any other option.

  • anny

    I helped my sister and her husband pay for a vet bill to the tune of 1500.00 and now they won’t make any of arranged payments. and he is a sheriff deputy so they make decent money (more then me) and I think it’s wrong for them to do that. especially with his job, he is supposed to be enforcing the law but don’t pay his debts.

  • broke

    So I went to beauty school with this girl a few years ago, and we became good friends. Even after we graduated we still hung out every week doing hair and nails on some clients. During school we both decided that I could buy her scissors with my credit card, for obvious credit, and she paid me back within the month. Later on she had asked if I would open up a credit card for a few stores for her during Christmas so she could get presents for her children, (she has 3) and she would pay me back as soon as she would stick to the payment plans we figured out . Well the first few months were good. She would pay me on time , but then she started making excuses like her tax refund still wasn’t back (should have figured out from that point that it was a big mistake). Her excuses were also that she got paid the day after the due date of the bill. So now a year later, I am $1300 in debt,( the starting amount was only $1000), my friend is constantly making up excuses, I can’t pay it off because from the beginning I told her I didn’t have the money, and I currently don’t have a job. I’m so frustrated with her because she’s older than me and I trusted her. And all the proof I have of all this is the text messages that I have saved. I just don’t know what to do.

  • http://www.facebook.com/beulah.sipp Beulah Sipp

    Loaned my son over 2k dollars, refusing to pay, keep lieing concerning his income tax check, what should I do. If he does not pay me, we have no relationship

    • Khan Quan

      Family members are the worst, most likely they won’t pay you.

    • Misslabeled

      Like the article says, you can write it off as a nonbusiness bad debt. I did that with a friend of mine. I know he’s struggling and I know he would pay me if he could. It was hard enough for him to ask, so I’ve just never asked him because I know it’s hopeless. I “loaned” the money believing in my head that I’d never see it again and that’s what saved my feelings about it, but he has cooled because he feels guilty. Anyway, I was able to write it off.

  • Anonymous Viper 7

    mine isn’t bad compared to some others, but i loaned my stepsister’s boyfriend $100 to bail her out of jail because she got caught with weed and he said he’d pay me back $150, and neither of them have a stable job, so i’m thinking of taking his xbox for ransom…

  • Khan Quan

    When it comes to money people tend to lose their mind. They are greedy when they see the green. this is bad especially a family members or a friend. To the fact we all got to have responsibilities to pay back something owed. Or items that has been borrow from you or your family. Sometimes people think it is a gift not a lending, but this is totally wrong and people should know better than that. Many times people just wanted to play dumb or stupid or act innocent. This is a fool of himself, because all the people around him will know this person is not trustable or unworthy at all.

  • Misslabeled

    Afraid of harming the relationship??? The deadbeat who won’t pay you back already harmed the relationship. This just sounds like a decision as to who should carry the resentment, the person that didn’t get paid or the person that wouldn’t pay you back. It’s already over. All that’s left is getting it out in the open.

  • Georgia

    You know the old saying… Fool me one, shame on you. Fool me twice, shame on me.
    First time, the daughter of my significant other said, “would you pick up a box of candy (30.00/lb candy) and I will pay you when I get to town. Never paid me. Second time, she asked “any ideas for Christmas gift(s) for dad”? Told her no ~ then she said “would you pick these up for me, so I don’t have to mail the gifts.” shame on me ~ did it and now she says… Money is beyond tight now! Mind you, we are talking $60.00 here.but, she has the money for Conceal Carry classes and Survival Courses, not to mention boarding 2 horses. It is not the money ~ it is the deception, Too bad for her, because I will not do anything for her anymore.

  • tryingtobefair

    I borrowed $4000 from a friend after leaving my abusive husband. This friend was very dear to me and insisted I take the loan. I explained that I had no idea when I could pay it back as I didn’t even have a place to live at the time and was earning $1000 a month while supporting my 2 children. BUT, my intension was to someday pay her back every penny. We eventually worked together at her office and I managed to pay her back over $1700. I soon found a better paying position but continued to work for her for free one day a week for 2 1/2 months. Much time passed and recently she contacted me stating I still owe her $3200. I reminded her that I had already paid her $1700 and then worked specific days, earning specific dollar amounts. These amounts were to be applied to the loan. I was also suppose to receive commission checks for the entire time I worked for her but only received one month worth of commission. I explained to her that because I had not heard from her I assumed that the loan was paid back in full. Now 3 years later she is saying that I did not work for free. I have print outs from her business manager of the clients I treated and the amounts I would have earned.
    I must say that the reason I left her office was also because I found out that she had been involved in 2 law suits regarding embezzlement. (she was being charged) I was afraid to have my name attached to the business. And she couldn’t pay me enough as well. One of the individuals charging her passed away. The other she hired a very expensive legal team and there was not enough evidence to find her guilty. (however i saw with my own eyes what she had done as far as this charge goes, only didn’t realize what was happening until after the case was over)
    My question is this, Would I be better off letting her take me to small claims court and showing my evidence there or mailing her the evidence I have? I’m afraid she will find some way to “change” or alter the evidence I send her (like remove these clients from her system, etc) . I am a single mom, living penny to penny and can’t afford to pay back something I don’t owe.
    I live in CA and did actually file for BK after this loan took place. I didn’t list it in my BK but worse case scenario I may have to. If that is even an option.
    We never signed an agreement but I have sent several emails prior to any payback that I am very appreciative and will pay her back if it’s the last thing I do.
    We both work in a small town and I have found out that she has bad mouthed me as far as my services go (I’m a hair dresser) I hate for this to get ugly and have her try to harm my career.
    Any advice? I would really appreciate it.

  • Kirsty

    Love this. When I try to get the money back I’m harassing. Guy is a jerk thought he was a good friend. Hard lesson to learn. I believe in Karma and he will be paid back for doing this some time someday. Wish I could watch him fall. What’s really sad is he is a former marine. You think he would have a conscience. It’s not enough to take to court over and all I really have as evidence is texts and they would have to be pulled out of my phone as some of them have been deleted. I know it can be done. What irritates me, is I can’t let it go. I’ve tried and I can’t tell anyone because I feel like a fool.
    well just writing it out makes me feel a little better.

  • moregoose1944

    My brother stoled a 1000 dollars cash from me on a truck deal. Then pretty much told me to stick it and he wasnt paying me back. any way your advice on being a nice guy to get my money doesnt really make sense. I did that all ready. the money was for his rent and bills so he wouldnt fall behind and hurt his credit. He was starting a new job and wouldnt get paid for 2 weeks. He makes over a thousand a week and single. He doest care if it ruins a life time relationship. So I will never see the money. The only thing thats left is go postal.

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