Lending Money To Friends Or Family Is A Recipe For Disaster: Study
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If you lend money to friends or family, beware: you may never get it back.
In addition, you could permanently damage your relationship with the borrower. These are the findings of a new Bankrate.com survey, which found that 46% of adults who loaned money suffered one or both of these consequences.
“The statistics are quite striking,” said Ted Rossman, industry analyst at Bankrate. “Basically half the time something’s wrong. “
Bankrate’s online survey of 2,490 adults was conducted at the end of August.
Among the biggest relationship killers were co-signing a loan or other financial product. Survey respondents said they also damaged their credit score and lost money in the process.
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Another big regret for survey respondents was lending their credit cards, which also led to nastiness, loss of money, and lower credit scores.
The respondents most likely to do these favors were parents of adult children. Others who are prone to burn themselves: credit card holders who pay group bills in hopes of accumulating more reward points. Older millennials – those aged 30 to 38 – were the most likely to end up with these bills.
Prepare in advance if you’re going to get into any of these sticky spots, Rossman advised.
“Proceed with great caution about this,” Rossman said. “Don’t lend money, don’t co-sign unless you’re prepared to lose it.”
By assuming that money is a gift, not a loan, you can prevent bad feelings from plaguing your relationship later on. But only donate that money if you can afford it, Rossman said.
Another better alternative is to gracefully give up lending money while finding other ways to help. This could include helping them find or introducing someone to other relationships who can help them.
It also helps make it more about a personal policy against co-signing rather than who you are in a relationship with.
“You can say, ‘I love you. I think you are a person of high character. If it was to write you a recommendation, I would. But co-signing is more than that, ”Rossman said.
Keep in mind that the worst-case scenario – that the relationship is damaged – will have lasting consequences.
“You really want to prioritize that and not make it super awkward for Thanksgiving, or even potentially the rest of your life,” Rossman said.
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