Be careful how you spend borrowed money. If your lender is a friend, they might want to have a say.
A new study shows that judgment of the debtor's spending persisted even after they had repaid the loan.Many of us know the painful feeling: An unexpected expense comes up, and we don’t have the cash the pay for it. In fact, due to inflation and the increased costs of living, almost half of Americans can’t come up with $1,000 on short notice . That can mean having to delay a necessary medical procedure or urgent repair of a car or washing machine.
What to do? Credit card overdrafts can be prohibitively expensive, and many people already face debt from student loans or mortgages, such that adding additional debt to their balance seems risky. This is when many of us might turn to friends to borrow the money. This solution sounds advantageous at first.
However, recent research by Ashley Angelu and colleagues suggests that there are pitfalls when borrowing money from friends. Specifically, the friend might feel entitled to judge what the debtor spends the borrowed money on and might get angry if they deem the spending frivolous or unnecessary. In one of their studies, 460 participants from an online panel imagined that they had given a friend $60 as a gift, a loan, or a payment for work.
If this is not enough of a cautionary tale, the authors discovered another interesting pattern. The judgment persisted even after the debtor had repaid the loan. In other words, even when people have been paid back the $60 they lent and then learned that the debtor spent their money on something deemed frivolous, they were angrier than if the debtor bought something that was necessary. The perceived right to oversight persisted even after the loan transaction was over and done.
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