How I made my deadbeat friend repay my loan to him

Hand pulling liner out of empty pocket

Maybe you've heard that you shouldn't loan money to friends.

Conventional wisdom holds that this is because you'll lose your money when your friend doesn't repay the loan. Then you'll lose your friend when your anger and the friend's guilt over the defaulted loan poisons the relationship.

It does sometimes work out that way.

Having loaned money to friends myself, though, I think it's both more and less complicated than that.

You already know perfectly well which of your friends are and are not likely to repay loans. Make loans accordingly, and you'll probably keep both your friendships and your finances in good shape.

To illustrate, I will bore you with the story of someone I dated casually, many years ago. Let's call him Paul, mostly because I have never dated anyone by that name.

Paul worked at a local record store. He lived with a bunch of roommates and got around via a beloved vintage motorcycle that sometimes ran and sometimes didn't.

He was one of those people who never had money for groceries or theater tickets or necessary new clothing, but generally had money for beer.

When he ran short of cash, he typically sold off some of the lesser prizes from his own music collection.

Paul was also sweet, caring, cute and occasionally funny, plus he had a tremendous crush on me. In my early 20s, that was enough to make him a sometime date.

I was smart enough to say a polite "no" when Paul asked me to cosign a bank loan so that he could buy another motorcycle.

When you cosign a loan, you become just as liable for the debt as the primary signer.

I wasn't convinced that Paul would make the payments on time (or at all), and I wasn't up for buying him a new speed machine.

Eventually Paul fell on hard times and needed a place to live for a month or two. He asked me if he could stay at my place, promising that of course he would pay me half the rent, groceries and utilities.

Fool that I am, I let him move in. Of course, he paid nothing.

Worse yet, he "borrowed" my ATM card and used it to "borrow" some money to pay for moving expense necessities, a list that (you guessed it) included beer.

I was furious, mostly about my "borrowed" ATM card. As I thought about the whole situation, my fury spread. I was going to make him pay what he claimed he would pay.

I changed my ATM pass code.

I wrote up an itemized list of how much he owed me and for what. I told him that he could pay me either $5 or a CD of my choice every week until the debt was paid off.

Then I showed up at his place of employment every Friday and collected. Mostly he didn't have $5, so I accepted a CD from his rapidly shrinking collection.

Believe it or not, he paid off the whole debt.

Needless to say, we stopped dating.

We stayed sort of friends, in loose contact until he moved back in with his parents in another state. I haven't heard from him since.

We could call this a friendship lost to a bad loan. But the truth is that this friendship would have ended sooner or later over Paul's attitude toward money, whether or not he had borrowed money from me.

I was always the person who paid in this relationship when we went to the movies, out to dinner, out for ice cream. I wasn't going to be OK with that forever.

As I look back on the situation, Paul didn't surprise me. It was always clear that he was a deadbeat.

He was trustworthy in the ways that he was trustworthy — a listening ear when I needed to vent, a friend who was happy to come over and feed the cat when I got caught late at work. I wasn't the first person he had stiffed financially, and I doubt that I was the last.

If someone knows you well enough to ask for a loan, you know that friend well enough to know whether or not he is likely to repay you.

Consider what you already know about this person and how he treats you and other people.

Is this the friend who is always up for a concert — as long as you pay for the tickets?

Or is this the person who carefully tallies up every restaurant check and gives you an extra $7 because you didn't have wine but the friend did?

Answer with brutal honestly, then make loans — or don't — accordingly. You're less likely to break a friendship when you don't put it under unrealistic strain in the first place.