If you have loaned money to a friend, it is quite embarrassing to have to ask him to pay off the debt. However, if you handle this tactfully, you can get your money back without ruining your friendship. As a first precaution, only lend the money after you agree on how it will be repaid and learn to speak to your friend in a serious, yet polite tone when asking for the debt to be paid. At worst, you can file a complaint against him. In these cases, you may be able to get your money back, but your relationship will never be the same again.
Steps
Method 1 of 4: Introduce the Topic
Step 1. Ask your friend to meet you in person
Invite him for coffee or lunch together. Make sure the atmosphere during the meeting is friendly so that he feels free to talk to you honestly. You can choose to communicate via email, phone or text message, but it will be easier to make yourself understood face to face, thanks to the use of body language and facial expressions.
- Make sure you will be alone during the conversation. Avoid embarrassing him.
- Send an email, text or call saying "Do you have time to meet and talk this weekend?".
- If you want to give advance notice of what the conversation is about, you can say, "Can we meet on Friday to talk about that loan I made you a few months ago?"
- If you want to make sure your friend feels comfortable, let him decide where you will meet. Try saying, "I wanted to talk to you about the loan I made you some time ago. Can we meet this weekend at your house or wherever you prefer, to talk about it?".
Step 2. Remind him of the debt tactfully
In some cases, your friend may have forgotten that he owes you money. Start the conversation by talking about the loan. You can say, "I'm glad I was able to help you by lending you some money last month, but I was hoping you could pay it back to me before I have to pay the rent." These words allow you to remind him that you lent him money and that it was not a gift, eliminating the possibility of misunderstanding.
Step 3. Be explicit
If after your first attempt you didn't get an apology and an offer to pay off the debt, address the issue more directly. In some cases, by expressing your request as a question, you can sweeten the pill. Try saying, "Do you know when you will be able to get my money back?".
- Insist that your friend answer your direct question without being vague. Don't accept "I hope I can pay you back in the next few months".
- If your friend avoids answering you or does it vaguely, insist on setting a deadline. You can say, "With a couple of months you mean no more than three months from now? Are we okay?"
Step 4. Don't allow the debt to go unpaid
The more time passes from the moment of the loan, the greater the chances that you will not be able to recover your money. In addition, if you are forced to take legal action, the judge may consider the fact that you have not requested repayment of the debt for a long time, beyond the originally agreed date, as an indication that you did not expect to get your money back.
Method 2 of 4: Repaying the Debt
Step 1. Tell your friend why you need the money
Often, people who ask friends and family for money are not very good at managing their financial situation. They may think they need the money more than you. In these cases, it may be helpful to let your friend know why it is important that you pay off the debt within a short time.
- Say, "I have to pay the property tax next month and I need the money I loaned you to put that amount together."
- You can even say, "My budget was very tight because of the loan I made you and getting the money back would allow me to put my finances in order."
- Remember, you don't have to have a good reason to want your money back. Debts must be repaid, but this strategy allows you to convince your friend to give you the money back without hurting him or her relationship.
Step 2. Ask your debtor to repay part of the loan
If he is unable to give you back the full amount due, ask him if he can give you some of the money, in order to demonstrate his trustworthiness and commitment to returning the money. The more honest and straightforward your friend is about his financial situation, the easier it will be to tell if he can actually afford to pay you back or if he needs more time. Whatever your difficulties, getting some of the money back is better than nothing.
- You can say: "It would be very useful if you could already give me at least part of the money you owe me today."
- If you are worried that your friend is having trouble paying you back, tell him "I know you are in trouble, but can you give me even a little advance?".
Step 3. Set a deadline
In some cases, people manage to organize themselves better when they have fixed deadlines. Let your debtor know that you expect to be repaid in full by a certain date. If you can, give them a payment extension. You probably prefer not to lose a friendship over a loan, but if you really need that money, a precise deadline will be very useful.
- Before you meet your friend, try to imagine some payment plans that may be suitable for him. If you're the one proposing these ideas, he won't have to.
- You can say: "What amount can you give up on a monthly basis?".
- Try to help your friend figure out when he will be able to pay you back by saying, "Do you have to pay your bills at the beginning of the month or at the end? You can pay me in the other part of the month, so that it is less of a sacrifice for you."
Step 4. Create a debt repayment plan
Set the dates and the sum of the installments, then ask your friend to respect your agreement. You can even ask him if he is willing to sign a legal document, especially if the other methods have not been successful. Introducing installments can make it easier for you to recover your credit, as your friend won't have to pay you back in a lump sum.
- Don't be ashamed to ask your friend to commit to your plan or ask him to sign a formal agreement, especially if it's a large sum.
- Start by saying, "It may seem like an exaggerated solution to you, but I want to make sure I come to an agreement with you. I have prepared a document that will help us solve the problem in the best way possible."
- Make sure your friend understands that the document you are presenting is just a first draft, a suggestion from you, and that you have a chance to agree on any changes. You can say: "I know you are planning a vacation for May, would it help you if we skipped that month's installment?".
Step 5. Deduct the value of the services from the debt
It may sound strange to you, but your friend probably gave you a hand when you needed it. If he drove you to the airport, helped you renovate your house, or looked after your children without asking for anything in return, you can deduct the amount you would have paid for those services from the amount he has to repay. This is a great idea, especially if your friend can't really pay you back.
- In some cases, it may even be appropriate to ask your friend for favors in exchange for money. For example, if you have to leave the city, you can tell him: "I am leaving for a business trip and I will not be back for 10 days. Can you water the plants and look after my dog? In return I will reduce your debt by € 300".
- If your friend is trying to pay you back but is having financial problems, offer him a chance to help you. Say, "I really appreciate that you're trying to pay me back by the date we set out, but wouldn't it be easier for you to look after my kids this weekend when I'm attending a conference instead of paying this month's fee? Your help would be very useful to me."
Step 6. Decide what's most important to you
In some extreme cases, you may have to choose between getting your money back and keeping the friendship. This is a tough decision, but if you've done what you can to get paid back and your friend simply can't afford it, you may want to think of the loan as a gift.
Method 3 of 4: Take Legal Action
Step 1. Submit a letter of request
The first step to legally recovering a loan is to write to your friend requesting repayment of the debt, giving him some time to find the money. You should speak to a lawyer before sending the letter and make sure it is written correctly; it must also be sent by courier or by registered mail, so that you can prove that your friend has actually received it. Include as much detail as possible.
- Write down the exact amount due, the duration of the arrears, your credit recovery attempts and any dates of legal terminations in the event that the money is not returned.
- For example: "On December 3, 2015, I loaned Mario Rossi € 600 for his construction company. I asked for the money to be returned by October 3, 2016. I asked for payment in person, in writing, and offered an installment plan. Mr. Rossi has not given any answer. I will take legal action if the aforementioned debt is not paid by December 3, 2016. At that point, a hearing date will be set to discuss the problem in the presence of the legal advisors ".
- If your friend responds to the letter and pays the debt within the time allowed, you don't need to pursue legal action.
Step 2. Search the internet for advice on how to proceed with your legal action
You will find several sites that help you make a regular complaint that will allow you to get your money back. These sites usually offer two types of support, free or paid. In most cases, you will be advised to complete your claim without paying for the service and only resort to paid support if your first attempt was unsuccessful.
- Research the reliability of legal aid services on the internet. Almost all of them are respectable, but some will only make you lose more money.
- You can read reviews online, check out consumer service, or search for information on the site about the lawyers who will assist you.
Step 3. Collect your documentation
Before going to court or speaking to a lawyer, get all the evidence at your disposal. Keep receipts, bank transfers, bank statements and all written agreements regarding the loan and any communications you have shared with your friend. All of this information is important to prove that you are really owed that money. Under the law, the burden of proof rests with the accuser and not the defender, so full documentation is very important to prove your right to compensation.
Step 4. Consider the prescription
The time frame available to you to recover a loan differs in each country. Do some research or consult your attorney regarding this particular before resorting to legal action.
Step 5. Test where the money comes from
For your claim to be successful, it is very important to prove that the money you loaned was obtained legally. It may seem absurd to you, but it is one of the most common loopholes that dishonesters use to avoid repaying personal loans. If you have written a check to make the loan to your friend, you just need to present a bank statement to show where the amount paid came from.
- If it's cash, it won't be as easy to prove that the loan took place or that you got the money from a reputable source.
- The receipt of the bank withdrawal on the date of the loan, for an amount identical to the amount delivered, may be sufficient proof.
Step 6. Recover your credit after the judge's decision
Even if you have won the legal case, it is often difficult to force the other person to comply with the sentence. Document all payments, including missed payments, and contact your lawyer right away if you have any problems. Motivation to avoid attorney fees may be enough to encourage your friend to honor the payments you have agreed upon.
Method 4 of 4: Loan Money Wisely
Step 1. Ask your friend to sign an "IOU"
Many people use this strategy to secure protection if the other party refuses to pay off the debt. This is a great way to make a loan because the terms of the agreement are very clear from the start. If your friend needs a few more days to find the money, changing the promissory note isn't difficult. If necessary, this measure will make future legal action much easier. For more information, read how to write a promissory note.
Step 2. Write down your payment plan
If you haven't asked your friend to sign an IOU before lending him the money, you should still ask him to agree to a credit recovery plan. Write the plan and have it authenticated by a notary. This makes it more legally binding and if you end up in court, your friend will have to take his or her responsibilities more seriously.
Step 3. Use apps to make returning easy
There are many apps available that make it quick and easy to pay back anything from € 50 for a dinner to € 50,000 for a loan for a small business. Try Splitzee, Venmo, Square Cash, Splitwise, Pay Pal or Google Wallet and you will have the possibility to ask and receive your money in an easier way.
- Splitzee, Splitzwise, and Square Cash are the best choices, because in these cases the debt is repaid through a joint expense. For example, you can pay your apartment bills with the money your roommate gives you back.
- Venmo, Pay Pal, and Google Wallet are best suited for large figures. These apps allow you to send bills and reminders to your friend, and money transfers are free.
Step 4. Assess your friend's trustworthiness before lending him money
Ask why he didn't go to more traditional channels (banks, credit cards, etc.) to get a loan. Find out if your current difficulties are really temporary or if you have recurring financial problems. You shouldn't lend money to someone who has very little chance of being able to pay it back to you.
- It starts with a simple question: "Why are you asking me for a loan?".
- It's a tricky question, but you should ask your friend if he has a lot of debt before lending him any money. It is legitimate to expect him to be honest about his financial situation.
- Ask if he is willing to accept a return deadline: "I understand that you have financial problems at the moment, but when do you think the situation will be resolved?".
- One of the most important questions is to ask your friend what he will do to pay off his debts. Say, "What are you doing to fix your financial situation? Can you get a second job or get a raise?"
Step 5. Avoid lending money to friends you don't want to lose
Despite your best efforts, there is always a risk of ruining your friendship, losing your money, or both of these things happening when you borrow a friend. Before you go into business with him, make sure you are willing to lose his friendship or the amount you loaned him.
Warnings
- If your friend spends a lot of money on alcohol, drugs, or gambling, get him to get help as he may be addicted. If you help him overcome his problem, you will be much more likely to recover your loan and, most importantly, allow him to return to a healthy and safe life.
- Be prepared for a possible negative response. Talking about money can be stressful, embarrassing and difficult, even in the most optimistic situations. Dealing with a friend also adds another concern to the problem. His potential negative reaction could ruin your relationship.
