Should you help out a friend with money?

Is it a wise idea to help out a friend with money?

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Would it be a good idea to help a friend out with money?

One of your friends may have asked to borrow $100, $1,000 or maybe more from you to help them out.

It's a difficult situation. Your friend may genuinely need some help, but at the same time it can open up a lot of complicated issues.

Do you trust them to pay you back?

Will they pay you back first before paying for anything else? What happens if they decide to go out to the cinema or a restaurant before paying you – how would you feel if they do that?

Are you going to create a 'contract'? Or perhaps a real contract?

Will you charge interest? How much interest? What happens if they don't pay on time?

What if they never pay you?

There's a reason why it's easier in a lot of ways to get a loan from Commonwealth Bank of Australia (ASX: CBA) rather than family or friends.

It might be worth knowing if your friendship is worth that $100 or $1,000. Maybe they see you as an ATM, or maybe they're in terrible need of that money and it could make all the difference.

Foolish takeaway

In many cases I think it might be easier just to say no. Lending money to friends can kill a friendship.

If you want to help them out then it may be better to just think of the money as a gift. Don't expect the money back. It's a bonus if they do pay the money back, but don't expect it back.

I once lent money to a friend, and it did take longer to pay back than expected. It could have destroyed the friendship. They paid me back and we're still close friends, but in a different life it may not have worked out.

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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