In debt to your friends
Owing money to your mates can put a strain on friendships and cause real long-term resentment.
When it is OK to borrow off your mates
1. You're out somewhere without a cash card/wallet/nearby cash machine. You have the money, just not on you, and you fully intend to pay them back.
2. When you want 40p for a bag of crisps... I mean c'mon!
3. When you're really struggling and they can afford to lend you rent/ food money until your next pay cheque arrives.
4. When there's a big event coming up, say a festival or one-off club night. The ticket/outfit will cost you a fortune - you can afford it, but only if you'd had time to save. They can front you the money and you can agree a pay back scheme over a month or three.
When it's NOT OK to borrow off your mates
There are also times when a trip to your bank or a call to the National Debtline (tel: 0800 808 4000) may be more advisable.
1. When you know they have no cash, just a generous nature.
2. When you have no intention of paying it back (but they expect you too).
3. When you are only mates with them for their cash.
4. When the amount is too much and you don't feel comfortable taking it.
How to go about it
Regardless of whether they offer or you ask, both sides need to agree some ground rules for the transaction. Depending on the amount and urgency of pay back you can be more flexible here, but generally speaking the lender should say:
- How much they will lend;
- When they expect it to be paid back;
- How they expect payment - lump sum or instalments?
While the borrower should be honest about:
- Any difficulties they may have in paying it back;
- When they plans on paying it back;
- How much they can afford to pay back each week/month.
If you can't pay them back
Even the best laid plans go haywire - you forget one of your bills needs paying; you have to get a train home for a family emergency; or your car breaks down leaving you with higher outgoings than expected and no spare cash to repay your mate. If you are honest with them and they still aren't desperate for the money they may allow you longer to repay them.
If they really need it back but you don't have the money to pay them and you're feeling overwhelmed by your debt worries call the National Debtline Helpline on 0808 808 4000 for advice on how to find a workable solution.
Retrieving money
If a friend owes you money and it doesn't look like you're going to get it back, the last resort is to take the case to a small claims court. Here you'll be able to try and retrieve unpaid debts up to £5,000. This can be a lengthy procedure and there is no guarantee that you'll get your money back, even if you win the case.
If a friend asks to borrow some money, ask yourself these questions:
Do you want the money back? Sometimes your mates won't have the money to repay you, so if you want to stay friends you should explain that you'd rather not lend them the money.
Do they have a good track record? If you've lent them money before and it's back in your pocket in no time at all, this would suggest that they will do the same again. However, if they've got a reputation for withholding debts you should steer clear of giving them any more cash.
How are they going to pay you back? Work out a realistic repayment schedule setting out how much you want to be repaid and when. Written agreements can help avoid any misunderstandings about repayments.
Thanks to the Citizen's Advice Bureau for these top tips.
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