Everyone finds themselves in a tough spot from time to time. Whether they need money to pay bills or any extra cash to fill their car up with gas, some people have no choice but to ask for a small loan.
You might be okay lending money to a family member, but you might be caught off-guard when a coworker asks to borrow money. Ultimately, you have to decide whether to give a loan. To help you make the right decision, here are seven dos and don’ts when lending money to a coworker.
1. Do ask why they need the money
You take a gamble anytime you lend money, so don’t be afraid to ask why the person needs the money. If he’s truly in need, he won’t have an issue discussing the situation. Plus, this is your opportunity to assess the urgency of the request. It’s one thing to lend a coworker $20 for gas and it’s a completely different thing if he wants to borrow cash for entertainment or recreation.
2. Don’t give extended personal loans
Before writing a check or offering cash, have your coworker agree to repay the loan at payday. Do not give extended loans. Other situations can occur which prevent your coworker from repaying you. The sooner you get your money, the better. Get this agreement in writing, regardless of the amount. If your coworker doesn’t repay you, you might be able to collect funds in small claims court.
3. Do consider other repayment options
Realistically, a coworker might be unable to pay back the loan in a timely manner. In this case, you can get creative and consider other options. For example, a friend lent her coworker $100 for a car repair. The coworker agreed to pay back $50 in cash, and she bartered to repay the other $50. Since this coworker was also a licensed hairstylist, my friend received services as repayment for the loan.
4. Don’t get management involved
If a coworker borrows money, this agreement is between you and your coworker. So, don’t involve management if your coworker gets selective amnesia and doesn’t repay. Your supervisor cannot reprimand the employee, plus involving management is unprofessional.
5. Do be observant to your coworker’s past action
Your coworker may tell a sob story to make you feel bad for him. But don’t make a decision based on emotions. Ask yourself, has this person asked others in the office for money in the past? By extending a loan to your coworker you might be starting a new trend. Maybe he’s burnt other bridges and looking for a new money source.
6. Don’t give what you can’t afford to lose
Even with a written contract, there’s no guarantee your coworker will repay you the money. For that matter, be very cautious, especially when lending large amounts, and only lend what you can afford to lose. If you lend your coworker $200 hoping that he’ll pay it back before your mortgage or rent is due, you might end up complicating your personal finances.
7. Do help your coworker find another solution
This is entirely up to you, but you can help you coworker come up with other solutions. Depending on your job, your coworker might work a shift for you — that’s if you can afford to go without the money. As a college student working in retail, I offered this arrangement to my best friend and it worked.
Speak with your supervisor to see if this is possible. The bonus hours may provide the extra income he or she needs to cover an expense. You can also suggest he use a free app called Activehours, which lets hourly employees cash in hours they’ve already worked for a free short-term loan. It’s a safe, reliable way to get cash and better than a payday loan.
There’s nothing wrong with helping a coworker get through a tough spot, but you have to consider how this decision will affect your own personal finances. Remember, only give what you can afford to lose, and make sure you have a written agreement.