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Dealing with deadbeat friends or family members

Money trouble is not only the primary cause of divorce in America, it also breaks up friendships and families when a borrower fails to pay back a personal loan.

Most of us have known a deadbeat friend or family member. We just can't figure out what to do about them.

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According to the money etiquette survey conducted by Ipsos market research and commissioned by PayPal, 63 percent of respondents have seen someone skip out on paying back a friend, and 57 percent have seen a friendship or relationship end because of it.

We are more likely to lend money to immediate family members (71 percent) or relatives (57 percent) than to friends (54 percent), co-workers (30 percent) or roommates (20 percent). Nearly half of us (48 percent) typically lend $100 or more.

But getting paid back is another matter -- and more than half of us (55 percent) have been stiffed.

Good intentions
There are perfectly good reasons to lend money to friends or family, of course. We like to be able to help out a friend or loved one faced with a health crisis, job layoff, divorce, business startup or college tuition shortfall. Unfortunately, our best intentions can quickly turn into hard feelings when the borrower fails to repay us.

Kim Izzo and Ceri Marsh, authors of "The Fabulous Girl's Guide to Grace Under Pressure," say handing over the cash without a repayment plan is a prescription for disappointment.

"Where people are too casual is, they don't state the terms of the agreement in advance; that's where you get into trouble," says Marsh. "I think people are a tiny bit embarrassed to finish that conversation, to say, 'OK, so when do you think you can pay me back? Great!'"

Izzo agrees. "They don't want to sound cheap," she says.

At the very least, capture these points in writing, even if it's on a cocktail napkin, before emptying your wallet, jot down:

  • The loan amount.
  • The date of loan.
  • The date or schedule of repayment.
  • Rate of interest (if any).
  • Collateral (if any).
  • Both of your signatures.

Deadbeat decorum
Izzo and Marsh have studied the deadbeat ways of their young, single crowd closely. Guys, they say, are more inclined to be lenders so as not to appear cheap, while women tend to be more concerned with being fair. The biggest change from the previous generation may be that you're more likely to have friends in need of a loan today.

"Your social circle is a lot wider these days, and there is a lot more disparity now than maybe there was in the '60s," says Izzo. "Now, with women being in careers, and with guys too, one friend might be a doctor and one might be a checkout guy at Safeway. I think that's changed the relationship to money. Where do we go for dinner? How do we entertain ourselves when we don't make the same amount of money? It's all money-driven."

Next: "It's not actually rude just to come out and ask them. ... "
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