Don’t risk roughing up a good friendship with these dangerous financial moves.

3 minute read

When a good friend asks for a loan or a financial favor, it’s only natural to want to help out someone you care about. And if you’re the one needing money or other financial assistance, who better to turn to than your best friend?

Mixing money and friendship can lead to trouble, though.

If things don’t go as planned, that friendship can screech to a halt with a big blow-up, a ton of resentment unloaded or a chilly silence as the friend quietly exits your life with no explanation.

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1. Lending money

The reason there are so many quotes about loaning and borrowing money – William Shakespeare’s “neither a borrower nor a lender be,” for example – is because the advice is tried and true. One of the fastest ways to ruin a friendship is loaning money to a friend.

That’s because if the friend doesn’t pay you back, the friendship is likely over, since the trust that cements a friendship will be permanently jackhammered into rubble.

Find out: How to Find the Best Personal Loan for You

2. Not lending money

You’re caught between an ATM and a hard place on this one, since lending money to a friend can ruin a friendship if your buddy doesn’t pay you back.

However, the friendship can also go south if your friend pleads in desperation for some financial help and you refuse.

Friendship doesn’t obligate you to bail out a chum with financial difficulties. However, if you want to help your friend without the potential resentment-inducing possibilities, that’s still possible.

Just make the money a gift that never has to be repaid and then let the whole thing go – without scrutinizing your friend’s spending habits or harboring expectations of repayment.

3. Defaulting on a friend’s loan

If a friend loans you money when you’re in financial straits, that’s one good friend. So, if you don’t repay the money, that’s a slap in the face to the friend who stepped up to help you out in a jam. This circumstance isn’t necessarily limited to a large amount of money, either. Even blowing off a $20 loan can cause a rift between friends.

4. Getting a loan based on a lie

You probably already know you shouldn’t lie about things like income and employment or falsify documents on a loan application, since the deception is considered fraud and could land you in legal trouble. However, lying to a friend to get a loan comes with its own set of consequences.

That’s because anyone who loans you money can’t help but notice your spending habits after you receive the cash. So, if you asked for the money to cover rent and then went on a shopping spree, that won’t sit well. Spend the loaned money on a vacation and you can count on that friendship coming to an unpleasant end.

Find out: 9 Red Flags of a Moocher

5. Co-signing on a loan

You may want to help your good friend with no or poor credit get a leg up with a better car, and co-signing for a car loan could be just the thing your friend needs to get that new ride. Be careful, though.

The good news is that your friend can build better credit with the co-signed loan if he pays on time. The bad news is, if the friend makes payments late or stops paying, you’re responsible for the amount owed.

And if your friend doesn’t tell you that he’s fallen behind, the payment history on your credit report – which accounts for 35% of your credit score – will take a serious hit, likely lowering your score.

If that happens, it’s going to be pretty tough to go out for a beer or shoot hoops with the guy who used your goodwill to ruin your credit.

Find out: How to Help Friends and Family Struggling with Debt

6. Paying money back late

There’s nothing worse than a deadbeat friend who borrows money in a pinch and then develops amnesia when it comes to paying back the loan. Nobody wants to keep hounding a friend about paying back money owed.

When you borrow money from a friend and take forever to pay it back, the seeds of resentment are planted. When they sprout, that’s going to be one big fight – and probably the end of the friendship.

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About the Author

Deb Hipp

Deb Hipp

Deb Hipp is a full-time freelance writer based in Kansas City, Mo. Deb went from being unable to get approved for a credit card or loan 20 years ago to having excellent credit today and becoming a homeowner. Deb learned her lessons about money the hard way. Now she wants to share them to help you pay down debt, fix your credit and quit being broke all the time. Deb's personal finance and credit articles have been published at Credit Karma and The Huffington Post.

Published by Debt.com, LLC