Archive for May 16th, 2024

Service of Ducking a Request for a Loan

Thursday, May 16th, 2024

I’ve written here about the pitfalls of lending money since 2010. In “The do’s and don’ts of lending money,” on NPR, I was most interested to focus on the part of Andrew Limbong’s article where he addressed how to say “no.”

He also mentioned the usual—best to give the money as a gift as, in the first place, you shouldn’t lend money that you can’t afford to lose.

The pundits he spoke with warned not to co-sign a loan either.

I loved the anecdote he shared about Michelle Singletary who had asked her grandmother to co-sign a car loan. Singletary, a personal finance columnist for The Washington Post, was a fledgling journalist at the time. Grandmother said: “Let me get this straight. So the bank, which has way more money than I do, turned you down? Now you want to put my finances on the line?” Singletary said she took the bus and saved “until I could save up enough to get the loan.”

She added that if you co-sign, “it also means that the debt is on your credit profile. That could prevent you from getting a loan or make the loan you need more expensive.”

What if you can’t afford to give money to the person asking for a loan? Limbong wrote: Offer other ways to help, say our experts…. If someone is coming to you for money, it probably wasn’t their first option. They’re probably in a bad situation and don’t see any other way out. They’re vulnerable. And your turning them down is going to hurt.”

Instead of giving money one expert helped the family member draft spreadsheets and created an action plan for repaying debt. Other ideas ranged from pitching in with childcare so the person can work more shifts to “offering to bring them dinner.”

I’m not sure about the dinner idea. I’ve just asked you for $5,000 and you offer to bring me a meal? Hmmmm.

If the cause is serious a better idea might be to help establish and promote a plea on a crowdfunding platform such as GoFundMe.

There are countless examples of friendships broken once the dynamic between two people changes to lender and borrower. But refusing money ends up in the same place. I’ve had to turn people down because I couldn’t give them anywhere near the amount of money they wanted and further, I knew that this would not solve their problem and it would be only the first of many future requests as they showed no plan to address the cause of the financial leak.

What words would you choose to turn down a request for a loan? Are there people to whom you would lend money in a second?

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