Image courtesy of: http://www.luckymojo.com
This article is inspired by several Facebook posts pertaining to the irony that it’s the money lender who feels shame when asking their money back, instead of the other way around. Especially when it comes to following up a late payment.
At first, after a talk with one of my friends, I thought that the main problem lies in assertiveness, or the lack of it. And then I thought that perhaps certain cultures encourage assertiveness, more than others but it really is not the question. I didn’t do the numbers, but it’s clear how what I thought was a cultural aspect in lending money, is actually a very personal choice of each son of a man. That is, the choice whether to “donate” or “collect” the amount of money that was lent.
But I’m getting ahead of myself, because even before a payment could be followed-up, there must have first been a pledge to do so.
I myself have rarely lent money to anyone, perhaps because I give the impression of being riff-raff (hahaha!). But whenever I did, I made sure both parties understood and agreed that the money being exchanged was a loan, and not a gift. And in the case where the money were a gift, I also made that very clear.
Risking to state the obvious, the difference between a loan and a gift is that the former has to be returned to the money lender at a given time, with a given interest rate. The latter is simply to be graciously accepted and appreciated.
Now, the problem with some people is they are easily caught by surprise and instead of thinking twice before lending money, they immediately agree to “giving” something that is to be returned “in the future”, “without haste”. In 98% of these cases, no payback ever takes place.
In the world of adulting, taking time to think before acting is basically lesson number 1. In the more specific town of adulting and money management, this moment for reflection becomes as necessary as breathing. Every cent counts, whether it be a past, present or a future cent of a currency. As thus, lending money means sacrificing having the “cents” today with a guarantee of getting them back in the future. In the case of giving, the former sentence would end after the word “sacrificing” and that would be it.
Personally, what I usually do when asked for a loan is to:
- Ask how much they need
- How urgent they need it
- When can they repay me
- How will they procure the money to repay me
If I’m satisfied with the answers to the former questions, I tell them that I’d think about it. Afterwards, I ask myself:
- How will lending a certain amount of money affect my budget until it gets repaid?
- Will I be alright if I never get to see that money again?
If, after analyzing my own situation, I still choose to lend my money, I make the following very clear when I finally decide to go ahead with the transaction:
- I make sure they understand that the money has to be returned
- I make sure that we both agree on the date of repayment (with or without interest)
- I would make them understand that although I don’t need that money now (and that’s why I can lend it to them), I would need it in the future.
- Depending on how much I trust the borrower, I would make him sign an agreement including a clause which mentions a possible collateral
(Are you still wondering why people don’t borrow money from me?)
You might be asking: what if, at the agreed date of repayment, the borrower refuses/cannot/does not return the money?
This is where the importance of assertiveness comes in. Being firm in reclaiming what is his own actually helps achieve the goal. And in the case they still refuse to pay you, then this is where a signed document would be useful.
In some instances, no amount of assertiveness can ever get a borrower to pay up. No matter how many touching, beautiful speeches are delivered, they wouldn’t budge. Because the truth is, the list that I wrote above- it’s just me. In real life, and depending on many other factors, the things I just said would be easier said than done.
So what is best advice I could give? be wise, and before you lend an important amount of money, make sure that your finances are sound enough in case you don’t get it back.