Deciding whether to lend money to your partner is a highly personal decision that should not be made without thoughtful consideration. Although your inclination might be to say yes to the person you love and care about, saying no might actually be the right answer for you and possibly for them. Here’s what you should consider in your decision-making.

1. Why your partner needs the money. 

Though you might feel uncomfortable asking your partner (or anyone for that matter) why they need to borrow money from you, you have a right to know. Ask questions, and more than one of them at that. 

Remember in “Dirty Dancing” how Baby’s dad, Dr. Houseman, didn’t press too hard when she asked him for a loan for a reason she didn’t want to disclose, which was actually to subsidize an abortion for Johnny’s dance partner, Penny? He only asked, “It’s not illegal, is it?” Spoiler: It was. Not to mention Penny could’ve died if Baby hadn’t come and gotten him when she wasn’t doing well afterward. 

Recall how upset Dr. Houseman was at his daughter for not telling the truth. Perhaps he should’ve questioned her more before agreeing.    

2. When your partner will pay you back. 

If after your partner discloses their reason for asking for a loan, and you believe them (more about trust below), ask for the terms of the loan, i.e., when and how they will pay you back and what will happen if they don’t hold up their part of the agreement. 

As you listen to your partner’s answers, consider how much weight your partner’s words carry with you. Can you rely on what they’re saying?

3. Whether you trust your partner to pay you back. 

Healthy relationships are premised on mutual trust. That said, you don’t need to trust blindly. With this in mind, it might serve you to put your agreement in writing.

Not the most romantic of gestures, a written agreement, just like a prenup, can still be romantic, as it demonstrates that you want to avoid a potentially damaging situation and that you respect one another. You: “I’ve got your back (but not at my own expense).” Them: “I want you to feel comfortable.”

4. Your partner’s track record with money.

Have you seen your partner in action before where money is concerned? Do they pay their bills on time? Are they organized? Trustworthy? Do they have other loans? Have they defaulted on a loan before, to your knowledge? 

History is usually a pretty reliable predictor of the future. If your partner’s track record with money leaves something to be desired, you might want to use it as a reason not to loan them money. Also keep in mind that there’s a first time for everything and that your partner’s first time not paying someone back could be with you.     

5. Your own financial situation. 

You support your partner’s reason for asking you for a loan. You believe and trust them that they’ll pay you back. They agree to put your arrangement in writing. But, and it’s a big but, you aren’t in the financial position to lend your partner the money without jeopardizing your financial health. 

Should this be the case, don’t be afraid to say no and explain why. If your partner doesn’t respect your current situation, consider yourself lucky you know now.   

6. Advice from professionals. 

Don’t take my word for it. Or your dear Aunt Sally’s. Ask a lawyer and a financial advisor whether it’s in your best interest to loan your partner money and what would be the best way to go about it to avoid any consequences, such as penalties for early withdrawal on certain accounts or tax implications.

Securing professional advice is particularly relevant when dealing with a large sum of money. Or a large sum relative to your financial position.  

7. How loaning your partner money might negatively affect your relationship’s dynamic. 

It’s no secret that money issues can strain relationships. Debt, financial infidelity, and whether one partner earns more than the other can factor into relationship satisfaction. 

Again, if you foresee an issue arising from your partner owing you money, such as them not wanting to or being able to pay you back, you anticipate becoming resentful as time passes, or you resent your partner just for asking, you should seriously consider not lending them the money.

Final thoughts …

With so much to consider and the potential for problems, it’s pretty safe to say that love and loans don’t always go well together and can make a good situation bad and a bad situation worse. Therefore, avoid becoming a lender to your relationship partner if you can.   

Should you decide to loan your partner money, understand the sensitivities involved, logistic and personal, and take extra care to see that the loan doesn’t drive a wedge between you. With the right amount of attention to your partner and your partner to you, you can very well preserve your relationship, perhaps making it stronger, even when a loan is involved. Which would be by far the best return on your money