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How to avoid lending to friends

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There's no shortage of websites espousing borrowing as the new way to save money. The trouble is, borrowing isn't always good value for the lender, especially if your possessions come back damaged.

A straw poll of friends and colleagues confirms the perils of lending.

Small items, especially books, often never make it home while shoes and clothing are likely to be handed back damaged and your friendship can struggle to cope with the unwanted wear and tear.

Asking a friend to chip in for the cost of repairs is good in theory but difficult in reality. So it pays to be very selective about what you lend out and who you lend to.

Most of us have friends who will care for borrowed possessions, return them promptly and pay for any damage. When it comes to mates you're not so sure about, it may be better to avoid the risks altogether.

A carefully worded response along the lines of "I've had a few bad experiences in the past, so now I have a policy of not lending stuff" may work. Or think about collateral. Asking to borrow something for yourself can give people cold feet. If not, it at least gives you compensation if your possessions get damaged.

Some people borrow as much as possible.

These are usually the ones who forget to return things and ultimately forget they ever borrowed them. After a while, you realise these people aren't friends, they're takers, and you may be better off without them.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.
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