How to Navigate When a Loved One Owes You Money

Asking a friend or a relative to pay you back is way up there on the awkward conversations list (you’ll find it right between having the sex talk with your teenager and asking your parents about their estate). But unless you can afford (literally and emotionally) to write it off and forget about it, the discussion is unavoidable. And if you approach it from the wrong angle, it could potentially ruin your relationship. Here are some tips to getting what you’re owed and maintaining that relationship simultaneous.

Remind gently.
According to a 2012 study Lenders’ Blind Trust and Borrowers’ Blind Spots written by Linda Dezső and George Loewenstein and published in the Journal of Economic Psychology, borrowers tend to rewrite history and view loans as a gift instead. That’s good information to have because it allows you to, perhaps, take the fact that they haven’t rounded back a little less personally. Remind your friend that it was a loan, but do so gently. Ric Edelman, author and founder of Edelman Financial Services, advises approaching the conversation like this: “Hey I hate to bring it up but I was wondering when you think you’ll be able to pay me back?”.

Remember the history.
The second reason to follow up with a light touch is the same impulse that caused you to lend the money in the first place. Your friend is or was struggling, that’s why they took the (also difficult) step of asking for a loan and why you decided to actually do it. If you begin guilt tripping them and consequently make them feel bad, you not only create more tension in the relationship but you also tear down their confidence in being able to pay you back says Edelman.

Give a reason.
While you shouldn’t have to explain to your friend why you want your money back, having a specific reason actually helps. “Giving them a reason like ‘I need that money to pay a car bill’ helps them to hustle a little more,” says Priya Malani, founder of financial planning firm Stash Wealth. “They understand that you urgently need that money and that you aren’t just asking for it back to be a jerk,” she continues.

Create a plan and offer help.
“Making a repayment plan is an effective alternative, since someone might not have all the money upfront,” says Edelman. Offering your friend the opportunity to pay in smaller installments is a good compromise — you get paid and they get released from a little debt. (You may even want to set up a system of doing it using a payment app like Venmo so that you can bill them incrementally, they can pay you incrementally, and you don’t have to discuss it again.) Another solution? Offer a different kind of help, like a brainstorming session to come up with additional sources of cash. Helping them find their next solution will help you get your money back quicker advises Malani. “Do some research and offer them alternate solutions like a personal loan, or selling some unused household items on ebay” says Malani. “Providing them with assistance shows your friend that you are trying to help them not [throw a wrench into their financial life].”

Get creative.
You don’t necessarily need to be repaid in cash. “Offering creative solutions like having them pay for dinner, gas in the car or movie tickets on a pay-as-we-go basis,” is another way of getting your loan back says Edelman. Alternatively, perhaps you’d be okay with them working it off. Have kids? Ask them to babysit. Have no time to run out to the grocery store because you are stuck at work? Ask them to pick up a few things. Lawn getting out of control? Ask them to mow it.

With Hattie Burgher