What to Do When a Friend Owes You Money

It's never easy having "the talk" with a friend who owes you money. Read on for helpful tips to navigate the situation.

Debt between friends can drive a wedge over time. And so, resolving it is in the best interest of you both. In some cases, you may be okay with a friend not paying you back. You may settle the debt by letting them treat you to lunch. Or, you may decide that if you need something they can provide, they can repay you when the time comes. As long as both parties are comfortable with the arrangement, there’s no wrong way to go about it. But arrangements should be made.

If you spend enough time together, friends spotting each other for this or that is bound to happen. While almost inevitable, the rules of money shared between friends are not set in stone. In turn, it’s crucial that you make some of your own, then make them known, and find common ground.

If feel being paid what you’re owed is necessary and important, say so. Furthermore, you should only lend money to those you trust to pay you back, even if you don’t expect them to. And if you’re deadset on settling the debt but you don’t want to burn an unnecessary bridge, here are some ways to tactfully approach a friend who owes you money.

Going in, Give Them The Benefit of The Doubt

Have you been waiting on someone to pay you back for a while now? Before you dub them a bad friend, consider the alternatives. There’s always a chance they forgot about the money or they’re just not thinking about it. Our day to day stressors have a way of overshadowing what’s not immediately in front of us, after all.

There’s also a chance they’re currently in a bad financial situation. As unfortunate as it is for you both, it’s possible they simply can’t afford to pay you back right now. But that doesn’t mean they shouldn’t be figuring out a way to prioritize it. Tell them you understand their situation and explain your own. Mutual empathy can be beneficial for all involved. They may feel ashamed about the lingering IOU, adding to their reluctance to bring it up. Be mindful of whatever fears or concerns they may carry around while they owe you. Then talk to them.

Be Direct, But Keep an Open Mind

Regardless of what’s going on, prepare to bring it up. If you feel their grace period has expired, be honest about it. Above all else, approach the conversation ready to sort out the issue. Be direct, but keep an open mind. You’re not there to accuse them of withholding money they should’ve or could’ve already repaid by now.

You’re figuring out how what needs to happen next.

male and female in cafe having a serious conversation on a couch

When it comes to money lent and owed between friends, there can be many shades of grey. Maybe you feel money is rightfully owed to you, but they don’t see it that way. It’s time to get on the same page. To get what you want, approach the money talk from a place of good faith, understanding, and take responsibility for why you need the money, especially if you need it soon.

If you have some giant bill coming up and you can’t pay it, that isn’t your friend’s fault now any more than it was when you gave them the loan. If you didn’t set a timeline on when you should be paid, you opened yourself up to the possibility of waiting longer than you may have envisioned. So moving forward, be clear about what you are asking for and why.

From there, you should be able to come to an arrangement together.

Brainstorm Together

two male friends sitting side by side on stair steps

If you’re just waiting around to receive the money you’re owed and nothing’s happening, it’s time to get proactive. Sit down together with the intention of brainstorming when and how they can pay you back. Working together will likely get you closer to getting what you’re owed than demanding they pay it or waiting silently for it to happen.

Come up with a list of ideas, write them down, and stay open to avenues you may not have considered. Don’t comment on the ideas until every possible strategy has been noted. Brainstorming should be an activity that encourages free-flowing thought on both ends. If you’re negative about their suggestions or hangups, it may discourage you from collectively arriving at a truly great idea.

From there, review and discuss the list. Now’s the time to lay out the pros, cons, and concerns you have. Once you’re both more informed about what’s a realistic possibility for you both and what definitely isn’t, make your suggestion and preferences known.

Create a Repayment Plan

Once you’ve come to an agreement, it’s time to make the repayment arrangement official. Financial experts tend to agree that the act of loaning money to friends and family should always include a formal agreement, for both your sakes. But don’t worry. You don’t need to hire an attorney or threaten legal action just yet. Just write it down.

This will help you both keep track of what you agreed to without having to fight about it or without anyone forgetting what was decided.

woman making a financial plan with calculator , pen, paper, and computer

One key thing to note is when you expect to be paid back. Setting up parameters around the debt will give you both clarity regarding expectations. It’s also okay to let them know you’ll be tacking on interest beyond a certain date, but this should be agreed upon by both of you. If it’s a big loan, having the terms on paper will bring you peace of mind and eliminate debt-related stress. It can also keep you out of small claims court.

Whether they owe you a lot or a little, paying debts off in huge lump sums is typically a lot harder than breaking it down into installments. If they can’t pay you all at once or they’ve delayed paying at all, you’ll have a better chance of getting what you’re owed by setting up a monthly repayment schedule. So write up a plan and take turns signing it. Remember, this cannot just be a burden that one person carries. When you loan someone money, you are both responsible for what happens next. So find ways to make it work for you both.

Simplify The Process of Repayment

I’m sure you’ve heard people say that “money and friendship don’t mix.” But that’s not necessarily true when you think about it. If the borrower is someone you trust and can help, you should if you want to. If they feel you are someone they trust and can rely on, they should feel comfortable asking for any form of help if they need it. Being able to help a friend in need and being able to ask for said help is the mark of a healthy bond.

With that said, you’re under no obligation to help someone just because you’re able. With this in mind, your friend shouldn’t expect your help just because you’re more financially stable. Intentionally or not, they’d be taking advantage of you.

Ultimately, a lengthy IOU or an endlessly mounting tab isn’t good for anyone. That reality is at the root of why many believe mixing money with friendship can complicate the relationship. Obviously, it can. But it doesn’t have to if you’re smart about it.

two people opening send and receiving money apps together at a table

When dealing with money between friends, simplifying the repayment process is important. You don’t want to add confusion, conflict, or complicated layers to your dynamic. So keep repayment options simple to avoid mix-ups. Thankfully, there are thousands of ways to share money these days. For instance, apps like Zelle, Paypal, and Venmo make it easier (and faster) than ever to request, pay, and receive money. Apps can also keep uncomfortable conversations or excuses at a minimum. The easier you can make the repayment process, the better this will go.

Or, let’s say you don’t really need the cash itself. If you notice they’re struggling to pay you back, find other ways to call it even or bring down the debt. If you’re comfortable with it, tell them they can pay you back with dinner or a coffee date. If they have some handy skill or provide a service, turn that IOU into an opportunity for barter exchange. Whatever you do, don’t leave money someone promised to pay you back hanging over both of your heads.

Don’t be Afraid to Remind Them

young female sitting in chair at home making a cell phone call and smiling

There’s nothing wrong with reminding someone they owe you. However, that doesn’t mean you should be pressuring them, threatening them, or reminding them 24/7. Again, when you loan someone money, you must also give them the benefit of the doubt and trust them to settle up. If it is taking longer than you would prefer, it’s okay to tell them. Still, you must accept that it may take them some time to pay you back, within reason. You may also accept that perhaps you made a mistake when you agreed in the first place.

We never know what life will throw our way. They may have had the best of intentions with their initial IOU, but now a financial monkey wrench has been thrown into the equation. It happens. The important thing is that you keep the line of communication open. Nothing puts a damper on a dynamic like a friend who only reaches out when they need something, and that goes both ways.

The better your communication, the more swiftly you’ll come to a solution. Keep your early reminders gentle, lighthearted, and honest. If you have done this already and feel unheard or dismissed, be more to the point next time. And use caution moving forward.

Know What to Expect Next Time

Before you lend them (or anyone else) money again, let the past inform the future. In matters of money and friendship, never bringing up what you’re owed allows resentment to build, often leading to a breakdown in communication on both ends.

Don’t let money owed be the end all be all. As we all know too well, having meaningful relationships requires talking about the tough stuff from time to time. So now’s your chance to grow and get what you want.

In these sometimes delicate situations, it’s not just about the IOU. If you care about the person and the bond you have, you must be willing to address their lingering debt. Frankly, you must do this no matter what, but especially if the relationship matters. Their reaction could be terrible or way better than expected, but it will undoubtedly be eye-opening.

woman withholding money from her spouse as he begs

Chances are, how they handle the money talk will help you decide if you feel comfortable loaning them money anymore. It’ll also help you establish how to best proceed, including how firm you need to be and if legal action might be necessary.

Hindsight is always 20/20, especially when you’re loaning money. Assess what’s still owed to you and look at your part in every debt honestly. Notice the crucial steps you could’ve and should’ve taken or avoided, like setting up concrete repayment terms from the start. Depending on the situation and your financial status, you may also need to learn how to say no, starting today.

Once you’ve established your unique financial boundaries, set them up and stick to them. When someone asks you for money next time, make your first step learning from past mistakes and building better repayment plans moving forward.

Read More: Ways to Say No When Someone Asks For Money

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