Lending to Family and Friends

Jan 3, 2025

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Money and relationships are a tricky combination. When a family member or close friend asks to borrow money, it can put you in a difficult spot. On the one hand, you want to help someone you care about, but on the other, lending money can easily lead to strained relationships or hurt feelings.

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.”

Finally, 1 Timothy 5:8 might make you think the only proper response is to lend money to a family member. It 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.”

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.
Second, lending the money would help the borrower and not contribute to that person making 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 is not sufficient income or ability to repay, promises to repay will be futile.
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?" For example, if someone needs money to repair a car, could you give rides to work until they’ve saved enough for the 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.
Again, only do that if you can afford it, and the gift should not encourage further financial mismanagement.

Finally, if you decide to lend the money, you should draft a written agreement specifying the amount, interest rate, payment structure, and collateral. This will help eliminate misunderstandings later.

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On Today’s Program, Rob Answers Listener Questions:

I have a mortgage at 5.92% that I've only had since June of last year. I've been making extra $200 payments on the principal each month. When would be a good time for me to consider refinancing to get a lower rate? And if I refinance, will I lose any of the equity I've built from the extra principal payments?
My husband and I recently retired and are trying to determine the appropriate amount to tithe now that we're living off our investments and pension. We're having a disagreement. He thinks we're "double paying" since we already tithed on that money when we earned it. I believe we should continue tithing on the full amount we're receiving. Can you provide guidance on how to help us resolve this?
I have about 4 to 5 credit cards that I no longer use and want to close out. Since I'm not actively using these cards, I'm worried about the potential for identity theft or fraud. What is the safest and best way for me to close these unused credit card accounts?
My two daughters bought a house together years ago when interest rates were low. One daughter stayed in the house while the other moved out. The daughter, who is not living there, is now having trouble getting financing because she's still on the original mortgage. Is there a way to remove her from the mortgage without the current homeowner having to refinance and lose the low rate?

Resources Mentioned:

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