Michelle Singletary and her husband used to lend money to her friends on a regular basis, until one incident "taught us a lesson," she says.

They lent money to a couple in their circle who didn't pay them back on time. "Then we attended a party at their house and noticed this new big-screen TV. And we're thinking, 'So you can buy a $1,500 TV, but you can't give our money back?'"

Singletary, a personal finance columnist for The Washington Post, didn't like that she was pocket-watching her friends. "So my husband and I decided we would only give money we didn't need to get back."

Lending money to friends and family is a tricky business. It can unite people in times of hardship. But it can also complicate relationships, especially because "so much of our financial decisions involve emotions," says Singletary, who is the author of a number of books on money management, including What to Do With Your Money When Crisis Hits: A Survival Guide.

When a loved one asks to borrow a significant amount of money, you have your own budget to consider — and your relationship, she says. What's your history together? How do you know whether you're in a position to help? Financial experts offer guidance on this topic, including how to say no without feeling guilty and what to do if you're asked to cosign a loan.

We want to hear from you: What are your thoughts on lending money?

DON'T lend money. Gift it

The experts we spoke to agreed on this point: Don't lend money to people. If you have the funds and want to help out, give it to them as a gift instead. That way, you don't have to worry about the borrower paying you back or what to do if they don't.

"As individuals, we are not in the business of lending money. We don't know how to do it because there are a lot of feelings involved," says Singletary. "That's why it should be left up to financial institutions."

Avoid getting into a situation where the borrower wants to "write up a contract or have terms" on their loan, says financial educator Berna Anat, author of Money Out Loud: All the Financial Stuff No One Taught Us. They imply a contractual obligation, which may put a strain on relationships.

For that reason, Anat says, "if I'm giving money, I'm assuming it's a gift. It's not going to get paid back. So from my end, I know it's money I'm willing to lose."

DO let your budget guide your decision

"Ask yourself: Am I really in a position to be gifting money right now?" says Wendy De La Rosa, an assistant professor at the Wharton School at the University of Pennsylvania.

If you have extra money to share, then by all means, give the money. But if you have to pull from the funds you've set aside for critical expenditures like your rent, your car payment or tax money, "you are jeopardizing yourself," she says. It also puts you in a vulnerable financial position if the borrower does not pay you back.

DO create boundaries around whom you support

Guilt can play a role in deciding whether to give money to a loved one, says De La Rosa, especially if you were able to climb into a higher tax bracket than the one you grew up in. You probably had some help along the way and might feel some responsibility to pay it back somehow.

If this sounds like your situation, De La Rosa says to make a shortlist of the people whom you're willing to give money to. Maybe it's direct family only or just your close crew of friends. You can't exhaust your own funds to help everyone.

Don't forget to talk about those boundaries with your partner, says De La Rosa. "I was born in the Dominican Republic. Lots of people sacrificed to bring us here. My husband grew up in Texas. We had to be very clear when we got married about who was in our circle."

DO offer other ways to help

You checked your finances, and you realize you're not in any position to give anyone money. How do you say, "No, but I still care about you?"

Offer other ways to help, say our experts. It's not going to be easy. If someone is coming to you for money, it probably wasn't their first option. They're probably in a bad situation and don't see any other way out. They're vulnerable. And your turning them down is going to hurt.

De La Rosa had to have a "no" conversation with a member of her extended family. "It was painful," she says. But instead of giving the person money, she helped them with their budget. She listed their debts, set up spreadsheets and figured out an action plan to get them out of the hole. "They saw I was there with them. And they really appreciated it."

So think about other ways to assist your loved one during this difficult time. Offer to bring them dinner. Help them with child care so they can pick up a few more shifts at work.

DON'T cosign a loan

If a friend or relative asks you to cosign a loan, don't do it, say our experts. Cosigning a loan means you're agreeing to be responsible for someone else's debt. If the main borrower misses payments, you must repay the loan.

It also means that the debt is on your credit profile, says Singletary. "That could prevent you from getting a loan or make the loan you need more expensive."

Early in her career as a journalist, Singletary asked her grandmother to cosign a car loan. And her grandmother told her: "Let me get this straight. So the bank, which has way more money than I do, turned you down? Now you want to put my finances on the line?"

"That was the end of the conversation," says Singletary. Ultimately, she realized her grandmother was right. "I caught the bus until I could save up enough to get the loan."

We want to hear from you: What are your thoughts on lending money?

Has a friend or family member ever asked to borrow money from you? Tell us about a time when you decided to pitch in — or a time when you had to say no. How did you make your decision? We may feature your response in a story on NPR. Email lifekit@npr.org with the subject line "Lending money."

The digital story was written by Malaka Gharib and edited by Meghan Keane. The visual editor is Beck Harlan. We'd love to hear from you. Leave us a voicemail at 202-216-9823, or email us at LifeKit@npr.org.

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