by Draven

Created on: October 22, 2007   Last Updated: October 31, 2008

Slaves and Masters

"Neither a borrower nor a lender be;"

Shakespeare's prose in Hamlet captures the truth of risk which is imposed upon any relationship in which this transaction occurs. "For loan oft loses both itself and friend," the character continues. Debt in any form carries with it obligation at risk, and when repayment is slow, late, or non-existent, that failure may carry with it greater than financial consequence.

To quote another classic tome, "The rich rules over the poor, And the borrower becomes the lender's slave." That quote comes from Proverbs 22:7 in the New American Standard Bible. As Dave Ramsey commonly says, "Thanksgiving dinner tastes different when you are eating with your master." The message is clear; even when debt is repaid as agreed, there is a master-servant relationship that is established when money is loaned.

From the Lender's View

Lending money to anyone carries the risk that they will not pay it back as promised in one way or another. If that risk bears fruit, the lender is in an uncomfortable position. They have the choice to either do nothing and hope things will work out, or go after the money in some manner. It may just be having a conversation, or perhaps legal action is required.

Imagine how much more uncomfortable the situation is when there is a pre-existing relationship between yourself and the person you are loaning out money to. What if they lose their job and can not pay? Think of the transaction in realistic terms, and do not let your fondness for someone turn into rose-colored glasses when something this serious could result as a consequence.

All of the above applies to co-signing for loans as well. If they default on the loan, the lender is going to come after you. You are liable just as much as the other party, and the lender knows they have a better chance of collecting from you.

From the Borrower's View

Borrowing money is something people do when they can not afford something, but do not wish to admit it to themselves. If you can not save up and pay cash for it, you really can not afford it. While it is acceptable in our culture today to borrow money for everything from a car to a hamburger, it is never particularly smart. Even worse, debt from multiple sources tends to build up as people consider how much the monthly payment will be, instead of the consequences on their long-term financial well-being.

If you borrow money from someone you have a relationship with, expect that relationship to be strained and at risk. Even if you pay back the loan as agreed, the interactions will necessarily change. Perhaps your friend or loved one will secretly or openly scrutinize major purchases you make during the loan term. After all, you owe them money. Why are you not using your income to pay them back? You didn't really need that couch; you should have paid them back first. These are just some possible scenarios that may arise.

Life has enough risk, do not add more. "Neither a borrower or a lender be."

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