My perspective on letting people borrow money is that I will always let a friend in need borrow money. And I think that I have done that without question, because when you friends need you, I believe that you need to be there to support them. Just like I would with my family.
So I have some friends in Sweden whom I have let borrow money. And then I have some to realise that this year, I have lent out a total of SEK 18.000 to various friends (it's the equivalent of US$2,300 in constant currency). And unfortunately, it's too large of an amount to forgive and since I won't forgive it for one person, I can't really forgive it for anyone. One friend borrowed SEK 10.000, one borrowed SEK 3.000, one borrowed SEK 1.000, one borrowed SEK 500, and one borrowed the remainder of SEK 3.500. The good news is that the person who borrowed the SEK 3.500 has initiated a transfer into my bank account, so they are all sorted. Now I need to sort out the remaining SEK 14.500.
Having given it some thought, when I get back to Sweden, I am going to have to create legally-binding paperwork for the person who borrowed SEK 10.000. I don't think he'll pay it back unless there is legal force behind it. And although we didn't sign paperwork at the time, all of our mutual friends are aware that he borrowed the funds from me. And he owes our mutual friends money as well. The difference is that I think that I am the only one willing to do what it takes to collect.
The experience hasn't soured me on letting friends borrow money, because I truly believe that you can't let the actions of a few spoil it for everyone else. But I think that in the future, for my friends in Sweden, depending on the person, I will limit what I let them borrow and we'll have to get it in writing, so that I protect my overall net worth.
I do feel kind of bitchy, because I don't have an absolute need for the cash right now. But left unchecked, they have no incentive to repay. But ultimately, it is not about how much money I have, rather, it's about people living up to and completing their obligations. Between my friends who I have let borrow money, escalating this issue with them is nothing personal. We can still be friends -- good friends in fact. I think it's just the right thing for me to do. Am I wrong?
Anyway, what are your thoughts and opinions on letting friends borrow money? What rules do or don't you follow and how much leeway and time do you typically give people, consider the variety of circumstances that develop?