Before you lend a relative or friend money, ask yourself whether you could live with never getting it back. If not, lend a smaller amount, help another way, or say no kindly. A loan that goes unpaid can cost you the relationship as well as the money.
Say your brother loses his job and asks for $3,000 to cover rent. Agreeing feels like the only decent answer, and it may be. But plenty of these loans never come back.
In a 2021 Bankrate survey, 38% of people who had lent cash to friends or family said they’d lost money at least once.
Once payments stall, the debt sits between you at every family gathering, and it gets harder to bring up each month. A gift leaves nothing owed and nothing to resent.
So size the amount to what you could give away. If $3,000 would leave your own bills short but $1,000 wouldn’t, offer $1,000.
Then decide whether it’s a gift or a loan, and say which out loud, since unspoken terms leave each of you remembering a different deal. For a loan, write a short note you both sign that lists the amount, the repayment schedule, and what happens if payments stop. If what one person owes you tops $10,000, IRS minimum-interest rules apply, so charge at least the applicable federal rate, a benchmark the IRS publishes monthly, or ask a tax preparer first.
You can also help without lending cash. Pay the landlord directly, or sit down together and build a budget that stretches until he’s working again. Cosign a loan only if you could repay all of it yourself.
If the answer is no, keep it short and kind, something like “I can’t lend money right now, but I want to help you figure this out.” Skip the long explanation, which only invites a debate over your finances.
Pick your number now, before anyone asks. When the next request comes, you’ll already know your answer, and any repayment is a bonus.
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