They say money and friendship mix like oil and water. While it may bum you out to be a bit short on money and having to ask a friend to borrow some, there’s not much worse than trying to retrieve money you’ve lent a friend.
It’s super awkward, and has been the nail in the coffin for many friendships, but it doesn’t have to be this way. If your friendship is strong enough that you’ve been confident enough to lend someone money, it should be able to get over the process of paying it back. A friendship built on respect and responsibility to each other is only as good as the last time it was tested.
Communication and patience are key. Start small and gradually up your insistence. And, look – worst-case scenario? You’re well within your rights to pursue your options to get your money back via the legal route.
But, let’s not bring out the big guns just yet, shall we?
How to collect debt
When it comes to asking a friend for money back that they’ve borrowed, it’s probably wise to approach things gently. After all – at this point, you’re a friend that’s helped another friend out, right?
Keep this in mind, and remember – the topic may be sensitive for the both of you. Your friend may have been feeling weird about even having to lean on your in the first place.
Greater Bank
Here’s how to ask a friend for money back;
Don’t get confrontational
Did you know that one third of Australians are financially illiterate?
Just remember there are two sides to every story, and you just never know the full extent of what’s going on in someone’s life until you ask. Sit down with your friend and have a conversation. Ask them how things are going, or if there is anything going on that they want to talk to a friend about.
If you approach the situation as a friend, you’re much likelier to get into a dialogue about the money. If you act confrontationally, you’re likely to spring your friend into defensive mode. Speak calmly and ask them whether they remember the loan, and if they needed the money for something in particular (a bill, an investment opportunity, etc), ask them how this panned out.
As long as it still feels like you two are chatting as friends, then move on to ask them whether they think they’ll be in a position anytime soon to pay you back.
Emphasise your own financial situation
If you meet resistance, or if your friend seems flippant about when or if they’ll be able to pay you back soon, it’s okay to tell your side of the story. By continuing to act as a friend, and remaining calm, you’re in effect appealing to their better nature by revealing why you’re bringing up the subject of the loan.
If you need the money back for something specific, lay this all bare. Maybe you’ve been caught unawares by an unexpected large bill, or you have a holiday or other large purchase coming up you need the money for.
Be clear that they would be really helping you out, in the same way you were able to help them out, by having the loan partially or fully repaid.
Ask for money back in writing
This may sound very formal or confrontational all of a sudden, but this is the 21st Century. We’re not talking quills and parchment.
After you’ve had your chat with your friend, it’s perfectly ok to email them, text them or message them on your social platform of choice just to follow up.
Don’t spam them – keep it casual enough, but direct. Mention that it was great to catch up, and that it really is important to you that you stay in touch regarding the loan.
Mention the loan and the amount, and any timelines you’d discussed for repayment.
What you’re effectively doing here is starting a ‘paper trail’ – some sense of tangible evidence that you’ve asked for the money back, should the worst happen and you end up having to get into a legal dispute.
Asking in writing can also just be the helpful reminder they need to act on paying you back.
Be flexible about how you are paid
If you and your friend get to the point where they’re willing to pay you back, it’s a good idea to be realistic about your timeframe.
It’s possible that the loan you gave out might need to be repaid in instalments, so be flexible and agree to this if you can.
In some cases, your friend may state that they’ll only be able to repay you after a certain date or occurrence, like a payment. Get these details in writing in some form if you can.
Ask their parents
Now it sounds like we’re back in kindergarten, we know, but this can be a last resort, especially if you’re on good terms with your friend’s parents.
If you and your friend are still relatively young, and your friend seems to be flaking on their responsibility, having a conversation with their parents about the loan and emphasising that you’ve been unsuccessful in recouping it may prompt them to offer to repay it on your behalf.
If you aren’t confident enough to do this – don’t worry – it’s not for everyone or every situation.
Take legal action
OK. So if you get to this point and nothing has worked, then you need to understand that going down the legal route is more likely to get you your money back, but it may be at the expense of your friendship.
To start this process, you should send your friend a letter outlining your debt/debtor relationship in full, and ask for the debt to be repaid. Make it clear that if they do not attempt to make good on what they owe, then you’ll be forced to take legal action. Often, this can be all it takes.
If they still don’t budge, you may want to contact a solicitor and begin drawing up what is called a minor case claim. This will be handled in NSW by the NSW Civil and Administrative Tribunal. You can find out more about the type of cases they handle, and how the process works on their website.
Open an Everyday Account with Greater Bank
Lending money as an individual to a friend can all at once strengthen and potentially doom a friendship. As long as both parties acknowledge their ongoing responsibility to each other, and are clear in the beginning on when the loan will be able to be repaid, it’s possible to do.
- If you’re lucky enough to have a friend that is willing to make good on their debt, an easy idea to organise repayment is to:
open a Greater Bank Everyday Account in online banking or our app; - Set up a PayIDTM for the account, linking it to your mobile phone or email address, and
- Provide your PayID details (phone number or email) to your friend.
This way, all they have to do to begin paying you back is search for your phone or email address in their banking app – then they’ll be able to deposit money directly into your account.
This article is intended to provide general information of an educational nature only. This information has been prepared without taking into account your objectives, financial situation or needs. Therefore, before acting on this information, you should consider its appropriateness having regard to these matters and the product terms and conditions. Terms, conditions, fees, charges and credit criteria apply. Information in this article is current as at the date of publication.