Rules of thumb when lending money to friends and family

If you’ve seen an episode of “Judge Judy,” you know that lending money to a friend or loved one can have dire consequences.

According to a recent CreditCards.com survey, more than three in five US adults (61%) have taken out personal loans or paid for group expenses in hopes of paying them back. Of those, 59% reported having a bad experience, such as losing money, damaging relationships, or escalating into physical arguments.

CreditCards.com Senior Industry Analyst Ted Rossman said: “The data confirms how often it goes wrong. It hurts your feelings and hurts your credit score.”

Still, especially in today’s difficult economic times, you may want to help those in financial need.

Finance and etiquette experts say you can lend money without hurting your finances or friendships.

Taking out a personal loan puts you and the recipient of your money in a delicate situation on two fronts. If they can’t pay you back, you could be in financial bondage. There is a possibility.

To avoid it, follow these 3 expert guidelines:

1. Lend something you can afford to lose

“The number one rule of thumb when lending to a friend, family member, or foe is to make sure you can afford to lend,” says etiquette expert and author of “Dining with Mister Manners” column. Author Thomas Farley says: on Today.com.

This can help you avoid exacerbating a potentially sticky scenario by placing a financial burden on yourself. says Rothman.

One way to keep yourself from getting too skinny is to think of your loan as a gift, at least in your head. That way, if a friend or family member refuses to pay you back, you won’t be upset.

“The money you get back is a bonus,” says Rothman.

2. Put everything in writing

If you’re lending a large amount of money (for example, not covering a check at a restaurant), having a written consent is “essential,” says Farley. “It doesn’t have to be written by a lawyer. It’s just a promissory note.”

Ideally, the document should state the amount lent, the date it was lent, and the expected date of repayment.

“You don’t have to force a document so much as to sue someone,” says Rothman. “But when these things don’t work out, it’s often due to lack of communication.”

3. Get in touch early

It is imperative that you speak as openly as possible about the amount you wish to recover. Nearly four in 10 of her Americans (39%) would rather leave her $100 debt unpaid than try to recover it from friends and family, according to a CreditCards.com survey. I answer yes.

That’s probably because many people don’t want to have a touchy topic with their loved ones, says Farley. But bringing up a touchy subject sooner or later makes life easier for everyone involved, he says.

That doesn’t mean you have to start harassing someone the minute you get the check. But checking in early can save a lot of hurt feelings.

“The longer you let go, the more they forget they even owe you,” says Farley.

If it’s taking longer than expected to get your money back, remember that this person contacted you because of financial problems. As long as they make an effort to repay you, it’s okay to give them some flexibility on the timing and size of their payments.

“Be empathetic,” Farley says. “But don’t be a doormat.”

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