The risk of them not being able to pay you back and thus destroying the friendship is so high that I wouldn’t recommend this unless you are ok with losing that person as a friend OR you just give them the money without expectation of it being paid back.
When "loaning" money to family and friends as the "lender" assuming it's a gift from the get-go is crucial. Or you just mutually agree it's a gift and move on.
1) If you are going to be financially impacted in any way by not having the loan repaid you should't "loan" (gift) it. Like gambling don't do it if you can't afford to lose it.
2) Assuming #1, the overall psychological stress and potential impact on the relationship just isn't worth it. As the "lender" you should feel good about helping someone while learning something about them in the process.
Personally, in having this outlook with family and friends they essentially get one shot. If all parties agree it's a loan and the debtor doesn't pay back the funds I move on without impact to the friendship but mentally they have a "strike" in my mind that essentially says "they can still be a good person and friend, but money can never enter the relationship again".
A modification I add is to ask them to do it for someone else once they're on their feet again. That's a pretty easy thing to agree to, and the anonymity of it allows the other person to make good on it if they feel that's important without putting any pressure on the friendship.
How does this work in practice, though? I don't know how this would be possible at all. I have loaned money to family members in the past, and been paid back when they were back on their feet. But if a friend or family member borrowed money and never paid it back, even after they were over their financial difficulties, and never mentioned it or made any effort to repay the loan, it would certainly affect my opinion of them; at the very least, I'd expect them to offer some explanation as to why they weren't able or willing to pay me back as we agreed.
So do you actually mean this, or are you just signaling how kind you are?
Why would I expect a friend whom I value to repay me? I have given, both in gifts and loans both implicit and explicit, much of myself, my time, my money, my worldly possessions over the years. If I held non-repayment against them, I think that would say more about me than about my friend.
A non-friend? Sure, that might be different.
Anyone can be forgiven of anything, if you are so inclined. No "signalling" required.
Asking money back did influence my opinion and that would ruin the relationship over time. That's why I've stopped asking for money and went even further and stopped expecting anything back.
I've picked that up from friends I made in Taiwan. It was mostly paying each other's lunch but there's no reason why it shouldn't work in other areas of life.
That's the misunderstanding that sours so many relationships.
You have to go into the "loan" with the mindset that you will work to maintain the friendship if it doesn't work out.
In short, it's a grant, not a loan. You will become this person's benefactor, and you may learn a lot about how their mind/life works. Perhaps more than you want.
The GP is unclear as to whether the loan happened before or after the friend obtained a job offer. Loaning moving expenses money to someone who just got a high-paying job offer and needs the moving money to start the job does not sound that risky.
It is worth wondering about that. My first job out of college offered an interest-free loan (paid back by paycheck deductions over 2 years) for moving expenses.
Have lent to many friends/family members over the years telling them to pay me back whatever/whenever they can, however they want. Some have taken decades. No one has not paid back. Few have needed a nudge, which I only give after they have climbed out of whatever hole. Honest people will always make an effort to repay their debts. The rest make lousy friends anyway.
Yeah, I couldn't loan that much. I'd gift a friend at most $ 2K and the expectation that I won't see it will ease my mind more than the expectation that they'd pay back $7K.
I've had favorable circumstances (parents that did ok, REALLY cheap rent in an expensive city, a regular job) and I've been able to have the same policy, every time my attitude is I will loan money that I could without being too broken up about it set on fire then and there and never with any explicit expectation of good use. if it's returned (some have, some havent been able to) it's a bonus.
now this is a SMALL amount compared to most people but I have friends who have had a really rough time financially.
It is also possible that the inability to pay back would negative effect the friend's ability to maintain the friendship. Between feeling they let the loaner down, or feeling guilty they couldn't repay it. Even if the loaner set no expectations, it could create enough negativity to sour the friendship. This doesn't have to be logical or rational, it could be an entirely irrational emotional reaction.
If $7k destroys a friendship, it's not really that close of a friendship.
Sure, there should be some consequences for not paying it back, but incessant mockery and refusal to pay for McDonald's is probably a fair exchange.
"Give people lots of leeway, but only once" has worked out well so far. People can't fool you into making a big mistake twice, and once is just the cost of doing business^W^Wfriendship.
On the other hand, finding friends past age 30 is hard enough that paying random devs random sums of money isn't that bad of a deal.
$7k is an absurd amount of money for 99.9% of the US (Recall the statistics on who has at least 3 months of income saved up? This is a similar amount of cash to have available). I've seen good friendships lost over a lot less money than that.
I agree with the parent - don't give it with the expectation of receiving it back. Save everyone the heartache.
I am sure it is very nice of you that you protect your friends from making the stressful and angering mistake of becoming indebted to you, but the OP is expressing an attitude towards money that makes it sound like it is less of a mistake to be indebted to them.
Sure. I didn't mean $7k specifically, but rather <amount you chose to loan>. Why loan someone a truckload of cash you can't afford to lose? It's kind of your fault at that point.
We helped my sister in law afford a down payment on a house. She still hasn't gotten a house after 6 months. Am I a bit miffed? Sure. But breaking off a friendship over a down payment seems absurd.
Life happens, and people tend to take a little while to figure it out. Who cares, it's not like we can take the money with us when we go to the next life anyway.
Even if you're able to afford to lose it, setting the expectation that the loan needs to be repaid will stress the borrower. That can be enough, in my experience, to break a relationship.
Unless they're a sociopath, borrowing significant amounts of money from friends is usually considered to be a last resort, they're already in a bad place. Adding another monthly payment to their budget going to put them in a worse place.
> If $7k destroys a friendship, it's not really that close of a friendship.
This is easy to say if you're a software engineer at a top tier company making a solid six-figure salary, but $7k is an enormous amount of money for the vast majority of people. I think I would significantly hurt my relationships if I failed to pay back $7k to any of my friends.
Yes, I believe you want to loan money to friends less than what the friendship is worth. In other words, $7k might break the friendship for some, for others not really.
It also depends on how easily money comes to the lender.
