Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

My friend thinks I'm a bank

Dear Dr. Don,
I have a good attorney friend whom I have lent money to on several occasions over the past 10 years. He always does pay it back, but sometimes it's several months later than he initially promises to repay me. He does include a generous amount of interest.

Right now he's requesting a $1,000 loan to give him extra comfort for a vacation. I am really sick and tired of loaning him the money, but I don't want to be a bad friend. Please advise.

Thanks very much,
Ron Remittance

Dear Ron,
I'm conflicted, too. Your friendship shouldn't depend on the Bank of Ron approving loans of indeterminate length and interest with your friend deciding on the loan terms.

On the other hand, he's got a track record of repaying you with interest. There are a lot of loan write-offs in the friendship loan market, and your friend hasn't forced you to write one off yet.

It sounds to me like you want to test the friendship and see if he'll still be your friend even if you don't loan him the money. To that end, it's easy enough to say that money's a little tight for you right now and that he should ask someone else for the cash.

Before you take that step, ask yourself why you truly object to these loans. Is it because you don't like your friend's assumption that the Bank of Ron will always be there for him? You don't like the idea of financing his vacation spending? Or is it something else altogether? It's natural to be curious about whether your friendship can survive you drawing a line in the sand about these personal loans, but a sea change after 10 years of being there for him is going to make your friend question what brought about this change in you.

If you can lend him the money without causing yourself a financial hardship, I'd argue for a middle-of-the-road position where you tell him that you'll loan him the money this time around, but he needs to find other ways to finance his spending in the future. That sets the stage for a discussion about your feelings concerning these loans.