|Dealing with deadbeat friends or
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.
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.
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
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,"
At the very least, capture these points in writing,
even if it's on a cocktail napkin, before emptying your wallet,
- 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.
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."