Lending to Family and Friends

Apr 10, 2024

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Relational Effects Of Lending Money

Proverbs 22:7 reads, “The borrower becomes slave to the lender.” Lending money can hurt a relationship. And that can happen whether you lend the money or not. You’re “between a rock and a hard place,” and it seems like either way, someone may end up resentful.

There are really only three things that can happen and only one of them is good:

If you decide not to lend the money, the other person could be upset.
If you do lend the money and the other person doesn’t repay it, you’ll probably be upset.

It’s only the third possibility that makes everyone happy:

You lend the money, and the borrower pays it back. But consider carefully why they asked to borrow in the first place. They may not be able to repay the loan if they’re already in bad shape financially, for whatever reason.

Fortunately, God’s Word gives us guidance here.

What does the Bible say?

First, God’s Word tells us to help those in need…lending money if necessary.

Deuteronomy 15:8 says, “You shall open your hand to him and lend him sufficient for his need, whatever it may be.”

Turning to the New Testament, in the Sermon on the Mount, Matthew 5:42, Jesus says, “Give to the one who asks you, and do not turn away from the one who wants to borrow from you.”

And finally, a verse that might make you think the only proper response is to lend money to a family member, in particular, is 1 Timothy 5:8, which reads, “But if anyone does not provide for his relatives, and especially for members of his household, he has denied the faith and is worse than an unbeliever.”

So should you always lend money when asked?

Not at all. The above Scriptures imply a couple of things:

First, there must truly be a need.
And second, that lending the money would actually help the borrower and not simply allow that person to make more unwise financial decisions.

Here Scripture has more to say:

Proverbs 13:11 warns about one possible outcome of lending money. It reads, “Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.” Getting a loan is often the “easy way out.”

Maybe the borrower tells you the loan would be a “lifeline”—which it may be. But it’s also “easy money” and the borrower may not appreciate the effort it takes to create that wealth. When you have to work hard for something…you tend to want to hold onto it.

Hard work produces character and wisdom.

Proverbs 21:20 reads, “Precious treasure and oil are in a wise man's dwelling, but a foolish man devours it.”

How can I discern a real need?

So before you get out the checkbook, think carefully about whether there’s a real need.

You also have to be sure that lending the money will actually help the borrower. Here are some questions to ask yourself:

Can the borrower repay the loan? If there’s not sufficient income or ability, promises to repay will come to nothing.
Then ask, what shape will you be in if the money isn’t repaid? If you can’t afford to lose it, you can’t afford to lend it.
Then ask, can you help in another way? If the person needs money to repair a car for example—could you give rides to work until they’ve saved enough for repairs?
And last, ask yourself, can you make the money a gift instead of a loan? That way you’re not expecting it to be paid back, so you can’t be disappointed and your relationship won’t suffer.

But again, only do that if you can afford it and the gift doesn’t encourage more financial mismanagement.

Finally, If you do decide to lend the money, draw up a written agreement—even if you’re lending to a family member. When something’s in writing, it clarifies things and makes it known who’s responsible for what and when.

The loan agreement should specify the amount, interest rate if any, payment structure and collateral, if any. That will help eliminate misunderstandings later on. You can find lots of promissory note templates online. Just fill in the blanks.

One final thought if you end up lending the money—make preserving the relationship your priority. Be prepared to forgive the loan if it keeps the relationship intact. But that’s only possible if you have the ability to lose it in the first place.

So those are some things to consider before lending money to a family member or friend, based on God’s Word.

On Today’s Program, Rob Answers Listener Questions:

My former mortgage company transferred my mortgage over to a new company and then a few months later, I received a letter in the mail from my former mortgage company that there was a breach in their system. Some of my information was taken from their system and they wanted to set me up with free monitoring from Kroll. I just wanted to make sure that this was a legitimate company that I should share my information with before I do so.
My wife has not worked in over 30 years since we’ve had children but she did have employment prior to that. Will she be able to collect any social security at 65 on her own or will it only be a spousal benefit?
I know you generally don’t recommend that people pay for identity protection plans since most of that stuff you can do yourself but if you can afford it, is it good to have those protection plans anyways?
I just received a settlement for $170,000 and just wanted to know what is the best way to invest it? I’m currently 49 years old and I have a 401(k) with about $400,000. I also have a savings account with about $80,000 and don’t really have any debt besides a car payment. What would be the best use of this money?

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