Thursday, April 17, 2008

The Moneylender

One of the first lessons I learned was, "never lend anyone money." On the other hand, I was only about six years old and getting my first allowance at the time, so it could have been representative of some command to get me to hang on to the little paper bills in my first wallet.

Since then I've seen how flexible this question could be. My family is quite conservative when it comes to money, in that they will actively and thoroughly investigate potential investments before transferring any funds. This, however, does not prevent us from actively trading and paying transactions completely within the family -- which implies that for every inherent rule, there's are circumstances where that rule can be legitimately broken.

So now I constantly wonder when it's right to lend money to someone, and when it's wrong to lend money to someone. In addition to that, I wonder if it's right to place deadlines on getting people to pay it back... and if so, exactly what the reasonable amount of time is.

As far as I remember, I've lent out reasonably large amounts of money exactly three times in the last few years. I usually don't impose deadlines for these sorts of things, and I have to admit that it shows -- none of these three sources has paid me back yet. But I also implicitly trust each of these three people, and I still have contact with all of them. I don't worry about these previous transactions, mind you -- I worry more about any future proposals that might come my way.

At the moment, I do have such a proposal sitting at my table right now. It's from an old acquaintance who's somehow become estranged from his family and lost all his available funds, and has thus been reduced to begging for handouts. This raised the basic moneylending question again -- do I turn over a small portion of my available funds to help get him back on his feet, or do I tell him to play a different patsy elsewhere?

You could argue that trust is an inherent part of the equation, and you'd be right. But I'm wondering if morality should also play a part here, that we're supposed to consider the well-being of other people besides us. If this is the case, then the investment of support becomes a major priority, and the expectation of return payment gets relegated to the back of our minds.

But then you can turn that on its ear and argue that the morality is inherent to both sides. What if the recipient has absolutely no intention to return the money? What if the recipient holds the urge to immediately forget that the transaction ever occurred? What then?

This old acquaintance of mine has asked for assistance to get back on his feet, but that may not be the whole story. What would you say if I mentioned that I haven't seen him for eight years? That he lives somewhere out of town and nowhere within easy access? That I know nothing of his immediate past and what brought him to these circumstances? For all I know, some combination of drinks, drugs and bad relations was involved -- whatever it might be, it's bad news for the prospect of moneylending in general.

And yet beyond all that, there's the chance that people could be exactly what they say they are, and the desire to believe that they're actually turning their lives around. It's a very optimistic point of view, yes, but it's still a valid one.

I'm still thinking about whether or not I should lend him the money. It's not a very large amount when compared to the three historical parcels I've lent out, but there's a good deal of principle hanging on this thread. There's a question of standards in there somewhere, and a question of trust, and a question of morality. Sometimes I wonder how the local banking industry could be so unemotional about this sort of thing.

And for all I know, I might just find myself on the reverse side of the situation if I'm not careful. Things do change, and fortunes change along with them. If that ever happens, then I'd literally be forcing this same train of thought on the people I know.

Penny for your thoughts.


kyutbabe said...

Have you considered charging some interest for money you loan out? It's not taking advantage of the other person's situation (if one needs money that bad then s/he would be willing to pay the interest), it's more of sending out the message to the person wanting to borrow money that your money could be earning interest elsewhere so s/he should be willing to replace that "income" when it's time to repay the loan. I guess this is also what makes banks unemotional about lending. Even though there's trust between the bank and the client, there's still a loan agreement that both parties sign, which covers that payment schedule, interest, penalties, etc.

I myself had to borrow a substantial amount from an officemate but I offered to pay interest. It really is better that way because it prevents any awkward moment or feelings of shame from happening; unless I suddenly decide to not pay my loan, then I don't think I will have the courage to go to work and face my colleague.

Sean said...

Kyutbabe: I suppose that charging interest is a logical possibility -- I worry about keeping track of it, but on the other hand, I don't get a lot of requests for moneylending anyway. That, and there's always a first time for everything...