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Give small loans to your extended family and friends instead. You’ll be surprised how many will pay you back, even when you tell them they don’t have to pay it

Give small loans to your extended family and friends instead. You’ll be surprised how many will pay you back, even when you tell them they don’t have to pay it back ever, or can when they’re able to. This is how financing worked for a long time. You’re the best judge of your network’s need for money, and if it’ll actually be helpful or be wasted on something wasteful or destructive like drugs. Larger loans to help family buy a home or a small business can be transformative. You can even ask for equity or to be repaid with interest when the property is sold (this makes it a loan and not taxable income). These human connections to your lending are incredibly fulfilling for everyone involved. Just be sure you can lose it entirely with no hurt feelings or holding it over them.

MuffinFlavored 3y ago
> Give small loans to your extended family and friends instead. I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this?
- convolvatron 3y ago
  ok, I'll bite. I've done this a fair amount - and while it feels good to help your friends and neighbors and family - its gets weird. old friends calling me up asking if I want to buy the bar they work at because they hate their boss. people who've I've helped a lot turned out not to really like me very much. but I still think the sentiment stands
- berkle4455 3y ago
  Never give loans to friends or family. Give gifts.
  - theogravity 3y ago
    Agreed. You give money to friends and family knowing it won't be paid back. Less emotional pain when you realize this.
  - devoutsalsa 3y ago
    What about your divorce attorney? My divorce attorney asked me last week if she could borrow money 650 USD, and pay it back in about 3 months. Also, my divorce is not yet final. Talk about awkward. I said no.
    - lelanthran 3y ago
      My God, you're in trouble!
      - devoutsalsa 3y ago
        Wish me luck XD
- crawfordcomeaux 3y ago
  I'll have go: Duplicating debt systems with those closest to you by even calling it a loan is a way to persist a system of oppression in the places young people grow up in. An alternative would be to practice freely giving, especially to needs, never calling things loans or favors, and maybe include with the gifts some lighthearted & light reading material on how to culturally dismantle systems of oppression.
  - syndicatedjelly 3y ago
    Well done, this was written in 100% the tone and attitude of a typical HN user.
    - crawfordcomeaux 3y ago
      Thanks! What would be a different approach to saying the same thing? This is a genuine question around how to communicate differently.
      - syndicatedjelly 3y ago
        The comment uses a lot of thousand dollar words and empty phrases. Try less hard, in short. > Duplicating debt systems with those closest to you by even calling it a loan is a way to persist a system of oppression in the places young people grow up in. Giving money to friends and family is oppressive, is what this is saying. Which is just wild to claim. And kind of cheapens the phrase "system of oppression". > An alternative would be to practice freely giving, especially to needs, never calling things loans or favors, and maybe include with the gifts some lighthearted & light reading material on how to culturally dismantle systems of oppression. The first bit is fine, but the last thing is super patronizing. How would it look if your friend asked you for $500 and you gave them some woke manual on how to dismantle "systems of oppression", whatever that means? This sounds "Hacker News"-y because there are a lot of smug programmers here who think they're borderline genius and can solve society's problems just because they read a couple philosophy books and have access to JSTOR. I kinda left my comment sarcastically, but I'm trying to being serious with this bit of advice. Just try less with your writing. The more your try, the faker it sounds.
- lesuorac 3y ago
  > even when you tell them they don’t have to pay it back ever This is really the key part. Because if you're going to be upset when they don't pay you back (totally understandable) you're going to be losing a friend because some of them will not pay you back.
- orochimaaru 3y ago
  Don’t loan money. It can break relationships if/when the borrower cannot pay back. If you do loan money do it with the implicit assumption that it’s a gift you may never get back.
- SkyPuncher 3y ago
  My wife and I have a pretty firm policy of not lending money (exception if someone just needs cash until they can get to an ATM/Venmo us back). We've seen too many people who've had relationships ruined over it. In our view, the two primary cases simply don't have good outcomes: * A situation where the borrower has made many, significant financial decisions. Lending them money isn't going to fix their problems. * A loan that is far too large. While this is not the poor decisions of point 1, it's often a purchase that has more affordable options. E.g. they can afford a $10k car, but want to purchase a $20k car.
  - bawolff 3y ago
    If neither of those situations applied (in a developed country) they would probably just go to a bank. Giving loans to people who banks pass on is usually a bad plan because they usually pass for a reason.
    - rightbyte 3y ago
      Unless you want a profit on your loans to friends and family you don't need do the same calculation as the banks. Also, you got way better character knowledge than they do. You know which friends are low and high risk and will do something stupid with a loan. Some are rock solid and some will use the money for 200USD cab rides between bars when they can't pay the gas bill.
      - bawolff 3y ago
        > Also, you got way better character knowledge than they do. You know which friends are low and high risk and will do something stupid with a loan. Maybe, but you are also blinded by your emotional attachment. I suspect for most people that would far outweigh any benefit from knowing your friend's character. As far as profiting goes - well is it a gift or is it a loan? Even if you get the principle back exactly you are still losing money due to the time value of money. Maybe your ok with that. Maybe you are ok with not getting it back at all. In which case it is more a gift then a loan. Which is fine as long as you are honest with yourself about your expectations.
- bawolff 3y ago
  > I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this? I mean, if your goal is financial equality, this is a terrible way to get there. People are usually friends and family with people of similar ecconomic class. Giving loans to people you know just continues the status quo of rich people having access to credit and poor people not.
- theragra 3y ago
  My personal experience: all my close friends returned money without issues. Not close: smaller amounts, often not returned.
- blankton 3y ago
  In my family its common to lend money. Amounts range from buying a car to downpayment for a house. We are financially a diverse group. From poor to middleclass. That enabled buying houses and escaping rent for a lot of people. Maybe the cultural and religios background is important in this context. I certainly would lend money and ask for many in my circle when in need.
  - lelanthran 3y ago
    I agree with this. Those communities that are more homogenous and well-knit (think of their community as an extension of their family) tend to have better success stories in escaping poverty than those that aren't. And I'd guess it's precisely that positive feedback loop where the rich informally help the poor, and when the poor get rich, the loop repeats.
- lelanthran 3y ago
  > I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this? Well, parent did qualify it with the word "small". If a small[1] amount of money is liable to cause strained familial relationships, then the loan doesn't matter, because that relationship is already fragile. The other side of the coin, especially with the qualifier "small", is that you can quickly figure out in your familial network is reliable and who is not. This knowledge is useful for more than just money. As someone famous once said, "If I lend a friend $100 and never see them again, that was money well spent". [1] Relative to the people involved, that is.
balderdash 3y ago
there used to be a service ( I think its was virgin money) where they would administer your personal loan so you could could lend money to a friend or family ember, but they third party would collect their payments etc. that way you have a third party reminding people to pay etc.
irjustin 3y ago
> Give small loans to your extended family and friends instead. Middle ground - both are very valid and need this. So agreed but up to a point. This is an extension of the "save a large sinking boat of poor people or save a sinking boat of a few first-world college students". There's valid arguments for either so just do what you believe to be best.
glimshe 3y ago
I'm sorry, but this is really bad advice. There is a case to be made to make emergency loans, or even donations, for helping with healthcare needs or disasters. But small loans for family and close friends is something that you should absolutely avoid doing due to the high risk of destroying relationships forever.

MuffinFlavored 3y ago

> Give small loans to your extended family and friends instead. I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this?

convolvatron 3y ago
ok, I'll bite. I've done this a fair amount - and while it feels good to help your friends and neighbors and family - its gets weird. old friends calling me up asking if I want to buy the bar they work at because they hate their boss. people who've I've helped a lot turned out not to really like me very much. but I still think the sentiment stands
berkle4455 3y ago
Never give loans to friends or family. Give gifts.
- theogravity 3y ago
  Agreed. You give money to friends and family knowing it won't be paid back. Less emotional pain when you realize this.
- devoutsalsa 3y ago
  What about your divorce attorney? My divorce attorney asked me last week if she could borrow money 650 USD, and pay it back in about 3 months. Also, my divorce is not yet final. Talk about awkward. I said no.
  - lelanthran 3y ago
    My God, you're in trouble!
    - devoutsalsa 3y ago
      Wish me luck XD
crawfordcomeaux 3y ago
I'll have go: Duplicating debt systems with those closest to you by even calling it a loan is a way to persist a system of oppression in the places young people grow up in. An alternative would be to practice freely giving, especially to needs, never calling things loans or favors, and maybe include with the gifts some lighthearted & light reading material on how to culturally dismantle systems of oppression.
- syndicatedjelly 3y ago
  Well done, this was written in 100% the tone and attitude of a typical HN user.
  - crawfordcomeaux 3y ago
    Thanks! What would be a different approach to saying the same thing? This is a genuine question around how to communicate differently.
    - syndicatedjelly 3y ago
      The comment uses a lot of thousand dollar words and empty phrases. Try less hard, in short. > Duplicating debt systems with those closest to you by even calling it a loan is a way to persist a system of oppression in the places young people grow up in. Giving money to friends and family is oppressive, is what this is saying. Which is just wild to claim. And kind of cheapens the phrase "system of oppression". > An alternative would be to practice freely giving, especially to needs, never calling things loans or favors, and maybe include with the gifts some lighthearted & light reading material on how to culturally dismantle systems of oppression. The first bit is fine, but the last thing is super patronizing. How would it look if your friend asked you for $500 and you gave them some woke manual on how to dismantle "systems of oppression", whatever that means? This sounds "Hacker News"-y because there are a lot of smug programmers here who think they're borderline genius and can solve society's problems just because they read a couple philosophy books and have access to JSTOR. I kinda left my comment sarcastically, but I'm trying to being serious with this bit of advice. Just try less with your writing. The more your try, the faker it sounds.
lesuorac 3y ago
> even when you tell them they don’t have to pay it back ever This is really the key part. Because if you're going to be upset when they don't pay you back (totally understandable) you're going to be losing a friend because some of them will not pay you back.
orochimaaru 3y ago
Don’t loan money. It can break relationships if/when the borrower cannot pay back. If you do loan money do it with the implicit assumption that it’s a gift you may never get back.
SkyPuncher 3y ago
My wife and I have a pretty firm policy of not lending money (exception if someone just needs cash until they can get to an ATM/Venmo us back). We've seen too many people who've had relationships ruined over it. In our view, the two primary cases simply don't have good outcomes: * A situation where the borrower has made many, significant financial decisions. Lending them money isn't going to fix their problems. * A loan that is far too large. While this is not the poor decisions of point 1, it's often a purchase that has more affordable options. E.g. they can afford a $10k car, but want to purchase a $20k car.
- bawolff 3y ago
  If neither of those situations applied (in a developed country) they would probably just go to a bank. Giving loans to people who banks pass on is usually a bad plan because they usually pass for a reason.
  - rightbyte 3y ago
    Unless you want a profit on your loans to friends and family you don't need do the same calculation as the banks. Also, you got way better character knowledge than they do. You know which friends are low and high risk and will do something stupid with a loan. Some are rock solid and some will use the money for 200USD cab rides between bars when they can't pay the gas bill.
    - bawolff 3y ago
      > Also, you got way better character knowledge than they do. You know which friends are low and high risk and will do something stupid with a loan. Maybe, but you are also blinded by your emotional attachment. I suspect for most people that would far outweigh any benefit from knowing your friend's character. As far as profiting goes - well is it a gift or is it a loan? Even if you get the principle back exactly you are still losing money due to the time value of money. Maybe your ok with that. Maybe you are ok with not getting it back at all. In which case it is more a gift then a loan. Which is fine as long as you are honest with yourself about your expectations.
bawolff 3y ago
> I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this? I mean, if your goal is financial equality, this is a terrible way to get there. People are usually friends and family with people of similar ecconomic class. Giving loans to people you know just continues the status quo of rich people having access to credit and poor people not.
theragra 3y ago
My personal experience: all my close friends returned money without issues. Not close: smaller amounts, often not returned.
blankton 3y ago
In my family its common to lend money. Amounts range from buying a car to downpayment for a house. We are financially a diverse group. From poor to middleclass. That enabled buying houses and escaping rent for a lot of people. Maybe the cultural and religios background is important in this context. I certainly would lend money and ask for many in my circle when in need.
- lelanthran 3y ago
  I agree with this. Those communities that are more homogenous and well-knit (think of their community as an extension of their family) tend to have better success stories in escaping poverty than those that aren't. And I'd guess it's precisely that positive feedback loop where the rich informally help the poor, and when the poor get rich, the loop repeats.
lelanthran 3y ago
> I feel like amongst the entire HN userbase that this will touch, somebody has to chime in and say the opposite on why you shouldn't do this? Well, parent did qualify it with the word "small". If a small[1] amount of money is liable to cause strained familial relationships, then the loan doesn't matter, because that relationship is already fragile. The other side of the coin, especially with the qualifier "small", is that you can quickly figure out in your familial network is reliable and who is not. This knowledge is useful for more than just money. As someone famous once said, "If I lend a friend $100 and never see them again, that was money well spent". [1] Relative to the people involved, that is.

balderdash 3y ago

there used to be a service ( I think its was virgin money) where they would administer your personal loan so you could could lend money to a friend or family ember, but they third party would collect their payments etc. that way you have a third party reminding people to pay etc.

irjustin 3y ago

> Give small loans to your extended family and friends instead. Middle ground - both are very valid and need this. So agreed but up to a point. This is an extension of the "save a large sinking boat of poor people or save a sinking boat of a few first-world college students". There's valid arguments for either so just do what you believe to be best.

glimshe 3y ago

I'm sorry, but this is really bad advice. There is a case to be made to make emergency loans, or even donations, for helping with healthcare needs or disasters. But small loans for family and close friends is something that you should absolutely avoid doing due to the high risk of destroying relationships forever.