What do you do when family members or friends need a loan? Do you say no, to avoid potential problems? Do you say yes, and regret it later? Have you found ways to make it work? We asked More Than Money members to share their experiences and solutions. Here are some of their answers.

Never Expect Repayment
I've found the only good "solution," when faced with the question of whether to loan money to a friend, is never to expect the money back.
- Margie Roswell

Pass It On
If a member of our family wanted a loan other than for business purposes (such as for education assistance or for a medical problem), my father would give them the money needed, instead of loaning it to them. If the recipient offered to take the money as a loan, my father would respond that the recipient should pass the favor on to someone else in need. I learned of the favors my father had done only after his death, when I was reading through papers in his files as we were clearing out his house.
- Nancy Kurtz

Create a 'Friend in Need' Fund
In the late 1970s I launched an experiment -a "mutual security fund"-with about a dozen friends. We dubbed the fund FIN, for Friend In Need, and it ran successfully for about 8 years. It was one of the best experiences I've had with money between friends.

To start the fund, we pooled an agreed-upon amount of money, and then each household contributed a set amount per month per person (including kids). All of us had modest incomes, so pooling our money made a big difference. FIN members could request money from the fund for any emergency. If a person needed a substantial amount, we would either call a special meeting or we would discuss it at our next monthly gathering (when we not only made consensus decisions about the fund, but enjoyed food and conversation). If someone needed only a small amount, they could just withdraw it from the account and report it at our next meeting.

At first the more prosperous members were concerned that they would be carrying those with less. Ironically, when the highest-income person got laid off, he ended up drawing more from the fund than anyone because his monthly bills were higher. Over the years, that humble FIN paid for setting a child's broken arm, moving expenses, emergency room visits, replacing a stolen bike, and many other expenses. Despite a withdrawal every two to three months, the balance generally stayed fairly constant.

Sure, it took an investment of time, but it brought us all a profound sense of security, not just from having money but from cultivating a caring community. We didn't just throw money at problems-we helped each other think of new solutions, pitched in with child care when someone had to travel for a funeral, etc.
- Charles Gray (excerpted and adapted from More Than Money, Issue 1, 1993, "Money Between Friends")

Err on the Side of Generosity
Twelve years ago, my husband and I worked in an adult education center in Mississippi. Our boss, a woman from the neighborhood in which we worked, was one of those folks who is the glue of her community-always transporting people to classes, doctors, social workers, youth choirs, etc. When her car broke down, my husband and I wondered and worried, "Oh, what should we do, what should we do? Should we loan her money? Should we give her money? Oh, dear, oh dear. Will this have a bad effect on our relationship? We wrung our hands a fair bit, while she walked around town in the hot, hot sun.

Finally, we decided that if we were to err in this situation, we wanted to err on the side of generosity. We asked her how much she needed. She told us $2,000. We gave her the money. She was elated. To her, this was not a complicated affair. We had been in angst mode, wringing our hands; she was in survival mode, walking under a Mississippi sun. She gratefully accepted the money. Soon she was back in business, hauling folks to classes, doctors, youth choirs. She remains a friend and teacher.

We give money to social change organizations in an effort to even the playing field for more people. One day, I realized that a dear friend of ours for the past 30 years was dealing with an increasingly worrisome future. A single woman in her fifties, she had no home and no retirement account (despite working her entire life), and no family or partner in the wings to help her later in life. We knew her to be a problem solver and an excellent steward of any place she had lived and anything she had owned. She was a nester. She also shared with us a desire to even the playing field, and was extraordinarily generous.

It occurred to me: Why not think of part of our philanthropy-typically a steady stream of money going out into the world-as, instead, pooling up in a little eddy to serve our friend for the next several decades? In other words, why not help her buy a house with this money that would ordinarily go to organizations, and let her know that in her will she can release this resource to the greater good, in any way she chooses?

Once again, this idea turned out to be incredibly simple and logical. She spent six months tirelessly looking for a home and found the perfect place. She is snug and safe, happier than she has ever been in her life. She is able to offer a port in the storm to others, and someday (at an appreciated value!) the larger world will also benefit from her stewardship.

Again, part of what got us over the initial hump was the thought, If we err, let's err on the side of generosity .
- Becky Liebman

Practice Non-Attachment to Money
I don't make many loans, but when I do it is generally to somebody from whom I am receiving a service, so I have leverage to collect. I feel better, though, about just giving money from time to time. Giving instead of lending helps me practice lack of attachment to money, which is part of my spiritual practice.
- Susan Pease Banitt

Understand Why Friends Don't Always Repay
I borrowed money from several friends in my twenties and never paid them back. It wasn't that much-between $50 and $200 each-but I still feel lousy about it. Looking back, what kept me from paying back was my pride.

To return the money at $10 or $20 a week felt too humiliating, an admission of how broke and out of control I felt. So I kept waiting until I could do it in one sum-just put $200 in their hands and say, "Thank you very much." But that day never came. I realize now that if the people I borrowed from had gently suggested we arrange a repayment schedule, instead of avoiding me, maybe I could have done it. I don't mean to imply they were responsible for my behavior! But it may help people who are loaning money to know that borrowers often feel too ashamed and stuck to turn the situation around without help.
- J.P. (excerpted and adapted from More Than Money , Issue #1, Money Between Friends, 1993)

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CircleLending
I used to run into problems loaning money to friends. If they didn't pay me back I ended up feeling used; or I would forgive the loan, but they felt uncomfortable; or I would just spend a lot of time and energy on it. Then I found a service that took care of all that for me. CircleLending sets up and administers loans from individuals to family and friends. It helps you structure the terms of the loan, and all the payments are processed through them. The best part, for me, is that it slows down the whole process, so both the lender and the borrower can be more realistic and specific about the payback terms. This significantly increases the likelihood of being paid back.
- Mark McDonough

See also "MTM Online: Equitable Giving in the Family," More Than Money , Issue 29, 2002, "Money Changes Everything-Or Does It?" pp. 5-6, in which members of More Than Money's email discussion group share tips about loaning money to family and friends. (See back issues order form on enclosed envelope.)

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