Request to borrow money

What is your reaction when someone close to you ask you for money on loan? Do you just open your moneybag and dish out the required sum of money? Do you dig for reasons why the loan is required? Do you negotiate to lend a lower amount or a higher interest rate?

My late father told me once that if you lend money to someone, then you can consider it lost. It is better that you change the amount of the loan into coins and throw them into the river. I was confused. Why? I wondered. He gave the reason that when you throw the bag of coins into the river, you can hear a big splash and that is more satisfying than worrying whether your borrower will pay you or not.

I once had a good friend who persistently requested for a small loan. I lend it to him to get him off my back. After the loan, I lost a good friend. Needless to say, the money was not returned and after a while, attempts at keeping up the friendship ended in failure. The purpose for the loan? To buy Chinese New Year dresses for the wife.

In another incident, I had a close relative who also persistently asked for a loan. The first phone call asked for 100 bucks, the second phone call increased that 100 bucks to 300 and the final request ended with 650 bucks. I was reluctant but considering the relationship, I relented and gave him the money. Another experience in life where I kicked myself senseless. The money changed hands and was never to be seen again. I found out later the purpose for the loan was to buy a wall lamp for the living room at the wife's request.

Don't get me wrong. I don't see anything wrong with lending or borrowing money. When there is a necessity, I'm sure any decent human being is compassionate and caring and will lend money for medical needs or for food or even to help set up a business but not for luxuries. Let's be clear on this: I'm not telling you to zip up your moneybag and refused to lend a single cent. When there is a need, by all means help out the poor fellow.

However, we have to decide whether loaning this sum of money is actually helping or just giving the borrower a reason to spend more money. Let me illustrate a simple case. Please note all names are fictional and not related to anybody living or deceased.

Jacintha asked me to lend her some money. After my bad experiences with lending money, I enquired and found out she needed the money for dinner because she just started work and she did not receive a full month's pay. That's fair enough. When she received her next pay cheque, she send me a message to say she's still unable to return the money because she had just started work and she had a lot of expenses to pay. Since it was a nominal sum, I replied that she can return the money after she receive her next pay cheque. In the meantime, I decided to look into Jacintha's lifestyle. I discovered a few facts about Jacintha:-
(1) She always eat out. Even if there is food on the table, she still insists to eat outside with friends;
(2) She smokes nearly two packs of cigarettes daily;
(3) She goes out for movies every weekend;
(4) She drinks regularly with her circle of friends;
(5) She spends quite a substantial sum of money on telecommunication charges; and
(6) She has a history of borrowing money from people around her whether they are friends, cousins, uncles and/or aunties.

I'm pretty sure she will not return the money when the next pay cheque comes in. It has become a habit of hers to borrow and not to return. It just doesn't pay to bail out this sort of people in the first place and I feel stupid to have fallen into the trap. The next time somebody like this comes to me I will tell them to face up to reality and if you need money for dinner then come and share my dinner or else you can go hungry. I feel lending money to these sort of borrowers is just being too complacent and not helping them to help themselves. We should do our part to help them by giving them advice on how to live frugally and how to live a life debt-free. Our advice will fell on deaf ears but it is our duty to help them and not to indulge them. Taking the easy approach by lending them money or telling them you do not have money to lend is not the solution.