October 23, 2020

Broken Borrowing: 3 Tips for Lending Between Loved Ones

Thousands of people regularly borrow money from friends and family members to start businesses, purchase assets, or even just make it through the month. In fact, a recent study commissioned by TymeBank revealed that 57% of South Africans are out of pocket before the 15th of the month; of this 57%, only 9% turn to loans, while 20% use credit cards and a whopping 59% get through by borrowing money from friends or family. Even more shocking is the fact that 76% of people use this borrowed money for non-essential expenses such as eating out, socialising and buying new clothes.

It’s understandable why so many people turn to friends and family as a financial solution:

  • Generally, this arrangement is less intimidating that an agreement with a creditor
  • The borrower is often granted the loan with zero interest
  • Due to the personal relationship between debtor and creditor, the repayment agreement is likely to be more flexible with regards to payment dates and deadlines

However, serious problems can arise from this arrangement due to the nature of the relationship. For example, the lender can be too generous for their own good, and the borrower may tend to postpone payments because they feel less pressure to settle the debt promptly. On the whole, lending between friends or family is not recommended, but sometimes things go wrong and you have no choice – so, to help you out, we’ve put together a few tips for borrowing without breaking bonds:


Conflict and tension often arise when the original terms of the agreement are forgotten and each party insists that the other is in the wrong. To avoid this, draft a document that outlines the conditions of the lending agreement, including:

  • The names of the involved parties
  • The full amount to be lent
  • The full amount to be repaid
  • Interest rate (if applicable)
  • Repayment deadlines
  • A witness signature – you can ask a mutual friend or family member to act as witness to the agreement.

If you want to be extra careful, you can even outline what will happen if the borrower fails to meet repayment dates.


Whether you are lending or borrowing, holding back from telling the whole truth will come back to bite you down the line. If you want to borrow money, be completely upfront about (a) why you need the money, (b) how much money you REALLY need, and (c) your ability to repay the money by the stipulated dates. Being honest about all of this may mean that you don’t get the loan, but it will save your relationship.

If you are the lender, be truly honest about whether or not you can afford to part with your cash. Given the high proportion of cases in which the borrower fails to repay the full amount, it is a good idea to think of the loan as money that you are giving as a gift (and might get back one day) – can you still afford it? You may feel that you are letting your loved one down, but it is important that they respect your choices and your finances.


When friends and family do borrow money from each other, it’s often because a desperate or urgent situation has arisen. However, it is very important that both the borrower and lender take sufficient time to consider the agreement and whether or not they believe it to be wise. If you are thinking of borrowing money, take some time to first consider all of your options, consult people you trust, and assess whether or not you really will be able to afford to pay back the money. If a friend has asked you to become the creditor, take at least a few days to mull everything over and don’t give in to pressure from them – this is YOUR money and you need to feel completely comfortable with the arrangement. Both parties also need to take time to really think about the dynamics of the relationship and how things could transpire in different situations e.g. What happens if the lender urgently needs the money back? What happens if the borrower is behind on payments but is spending money on non-essentials?

Above all, you should always prioritise your own financial wellbeing. It can be incredibly difficult, especially if you are a person with an instinct for nurturing and a tendency to put others before yourself. But you need to be sure that you are financially and emotionally able to keep yourself at your best so that you can be the best possible friend and family member to others.

Have you got a lending agreement that you’re unsure about?
Get in touch with our expert team of financial advisors and debt counsellors to figure out the best way forward: