Dear Moneyist,

A friend of mine is getting married this summer. Over the past few years he has occasionally borrowed money and has been paying it back in small amounts regularly, but he still owes an amount in the low four figures. At this rate, it will be a few years before it’s paid off.

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They are going to ask for cash donations to go towards a honeymoon or setting up housekeeping. Both of them have had their own living arrangements and do not need toasters, etc. I want to contribute, of course, but would it be better to forgive part of the loan, or give them the cash they are requesting?

Befuddled Best Man

Dear Befuddled,

I have two pieces of advice for you: Don’t lend your friend any more money and don’t mix up the long history of these ill-advised loans with his wedding present. He might hope you will forgive a large portion of the loan as a wedding gift, but that doesn’t seem fair to either of you. He borrowed the money and he should repay it. You can give him money as a wedding gift if you like, but I see a request for money in lieu of a wedding gift as just that — a request. Give him a nice gift. Some tea cups or a bottle of champagne to be opened on their first anniversary with two champagne flutes.

His marriage is, however, a good opportunity for you to sit him down and arrange a payment plan a couple of months after the wedding. He will (or should) want to start making financial plans with his new wife, and she definitely should be aware of any outstanding debts, especially debts that involve a dear friend. You may or may not choose to give him a haircut, but in the spirit of transparency and this new payment plan, ask him to notarize the loan agreement. About two-thirds of loans to friends and family are not repaid, and oral agreements are notoriously difficult to enforce.

Also see: My boyfriend and I have two kids — should I pay off his $130,000 student debt?

My approach may sound harsh, but there’s a reason why some people borrow money from their closest friends. Banks have turned them down, other friends and family have seen how they mismanage their finances and they have also said no. Plus, it’s easier to rely on friendships for both loans and the non-payment of loans. After all, the collateral here is the friendship itself. If you insist on your friend paying the money back, it rocks the balance of power in the friendship. He can end it and walk away. But people who borrow from friends often rely on that as leverage.

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When you borrow thousands of dollars from a friend, it is a business arrangement. Unless the borrower wants to see it as a personal matter and, as such, relies on the friendship to keep borrowing — as this man did. That only benefits one person: the borrower. I get too many letters from people who gave money to friends and family. Their friendship and good name was the only credit score they needed. If your friend is man enough to ask for thousands of dollars, he should be man enough to sign a loan agreement. It would, like I said, be polite to wait until after the wedding.

If you really want this money back from a friend, you cannot treat him as anything else but a debtor. You need to treat them like a customer. That doesn’t mean you have to be mean or lose your cool. By not making any real effort to return the money, he has put a price on your friendship. In this case, it’s a low four-figure sum. The only thing standing between you and the money he owes you is the risk of losing this friendship. So go to the wedding, don’t mention the loan, be there for your friend and, when the confetti has been swept away, sit him down to clear this debt once and for all.

Do you have questions about inheritance, tipping, weddings, family feuds, friends or any tricky issues relating to manners and money? Send them to MarketWatch’s Moneyist and please include the state where you live (no full names will be used).

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