How to Loan Money to a Friend

If you loan money, get collateral from the borrower like a piece of jewelryYes, you’re reading the title correctly.  It’s not “Don’t Loan Money.”

Traditional personal finance advisors say you should never loan money to friends or family members, right?

Count me in as a fully tenured professor in that School of Thought.

What if you decide to ignore the advice and become a lender?

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I Lied About Money and Got Away With It

Lied and got away with itCarolina told me about her college roommate, Alice, who lied to her and to her own mother. Alice told Carolina a sob story that Alice’s mother had cancer and she needed to borrow $5,500 from Carolina just for 2 weeks until she got her student loan funds. Carolina did not have a lot of spare cash, but she thought it was justifiable to give her roommate a short-term loan for such an important cause.

But Alice lied. She never repaid the $5,500 to Carolina, never paid any rent, and her mother didn’t even have cancer.

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