You should always be on guard when a friend asks for a loan, unless you are prepared to lose both the friend and your money.
This is because tales of people taking advantage of their friends when it comes to borrowing money are all too familiar, with a fair number of loan disputes ending up in court in recent years.
You should know that truly good friends will never ask you for money because they would rather suffer in silence than let their financial woes become your burden as well.
The proper way to help friends who are saddled with, say, credit card debts, is not to help pay part of it, but to accompany them to non-profit social service agency Credit Counselling Singapore, which can help debtors confront and deal with the problem systematically.
Similarly, it is unwise to help someone pay the bills of a company in trouble because business debt can be a bottomless pit and this means you will never get your money back if the company folds.
Here are two lenders who had to resort to lawsuits to recover their loans.
Friend borrowed $500,000
It started with a frantic call from a friend to help solve her company’s cash flow problems. The lender did not think twice and wrote a cheque for $15,000 to help her friend.
She did not even hesitate four days later when the same friend asked for another $60,000. Her generosity was soon abused by the friend, who continued asking for more interest-free loans until the debt ballooned to $500,000.
Whenever the lender pressed for repayment, the friend cycled through various excuses – ranging from her funds being tied up due to a delay in her divorce to seemingly absurd claims, such as her four brothers and a nephew dying one after another.
The loans took a heavy toll on the lender, who took on more part-time jobs and even borrowed from her father instead of telling her husband.
Not surprisingly, her husband blew his top when he found out that his wife had been conned by someone she hardly knew. He confronted the friend and forced her to sign an IOU to state that she had borrowed $525,200 in all.
Despite this, she still refused to return the money and was sued in the High Court.
Thankfully, the lender kept fairly good records of the loans and could prove that she had made 43 payments totalling $487,700. The friend had returned only $21,000, and the court ordered her to settle her remaining debt of $466,700.
This meant that the lender still could not recover over $35,000 of her original loan.
Loan shark or investor
A man tried to get his borrower to honour a $2 million IOU, but he ended up being accused of illegal moneylending.
The borrower had said he wanted the money for investment and even promised the lender some returns.
But the borrower claimed that he borrowed only about $66,000 and that “the discrepancy” was due to the high interest rate and penalties for late payment. He admitted to writing the IOU, but said he did so under duress because he had “no choice”, as the lender came to his home with a group of men.
The lender argued that the funds were meant to be placed in the borrower’s investment scheme, which could reap high monthly returns. However, he failed to provide any details of the investment agreement, which was supposedly made orally.
Not surprisingly, the borrower denied there was any such agreement.
The High Court found it incredulous that the lender could not provide details of his alleged investment or loan when such a big sum was involved.
It was also strange that the lender had no idea how the money was being used by the borrower.
The case was dismissed not because the borrower did not take any money, but because the lender’s suit was a “non-existent cause of action backed by no evidence”.
These two cases should make you think twice before lending money to others because it is all too easy for you to lose everything if the borrower just denies the existence of the loan.
Even if you successfully sue and recover your money, you still lose because you would need to spend a substantial sum on legal costs to recover the money that rightfully belongs to you in the first place.
Tan Ooi Boon
https://str.sg/Ayvn
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