Listen on Apple Podcasts, Spotify, Buzzsprout, online, or search ‘The Stewardology Podcast’ in your favorite podcast app.

 

Your cousin Monty, the one who still owes you $20 from that pizza night back in 2007, shows up at the family reunion with a sheepish grin and a pitch: “Hey, just need a quick $5,000 to launch my artisanal pickle business—I’ll pay you back, promise!” Your wallet says “Run!” but your heart says, “He’s family!” Before you draft that IOU on a napkin, let’s explore the biblical wisdom, practical risks, and rewards of lending money to family. Lending to loved ones is a minefield of good intentions, awkward holiday dinners, and potential financial fiascos. Let’s unpack it.

 

1. Lending vs Giving: Key Biblical Principles

  • Lending changes the relationship dynamic. Lending to a family member isn’t just a financial transaction—it shifts the power dynamic. Proverbs 22:7 (ESV) says, “The rich rules over the poor, and the borrower is the slave of the lender.” Be cautious; lending can strain family ties.
  • Generosity without expectation is Christlike. Jesus encourages giving without demanding repayment, reflecting love and grace. “If you lend to those from whom you expect to receive, what credit is that to you?… But love your enemies, and do good, and lend, expecting nothing in return…” (Luke 6:34-35, ESV).
  • Lend with compassion, not exploitation. “If among you… one of your brothers should become poor… you shall not harden your heart… you shall lend him sufficient for his need…” (Deuteronomy 15:7-8, ESV).
  • Key takeaway: If you’re not prepared to forgive an unpaid loan, consider giving instead. “Give to the one who begs from you, and do not refuse the one who would borrow from you.” (Matthew 5:42, ESV).

2. Risks of Lending Money to Family

  • Strained relationships. Lending can turn unconditional love into a borrower-lender dynamic, risking resentment if repayment doesn’t happen (Proverbs 22:7).
  • Broken trust and family distance. Unpaid loans can fracture families. “Resentment kills a fool, and envy slays the simple.” (Job 5:2, NIV).
  • Damage to the borrower’s reputation. Proverbs 22:1 (ESV) says, “A good name is to be chosen rather than great riches.” If they default, it can tarnish their standing in the family.
  • Enabling poor financial habits. Lending might delay them from facing underlying issues like overspending or poor budgeting.
  • Lack of legal recourse. A handshake agreement often leaves you with no legal guarantee. If you loan large sums, consider how a loss might impact your financial future.
  • Risk to your own finances. Proverbs 22:3 (ESV) warns, “The prudent sees danger and hides himself, but the simple go on and suffer for it.” Lending large sums could jeopardize your financial stability.

3. Rewards of Lending Money to Family

  • Blessing others. Helping a loved one with the resources God has entrusted to you can be deeply rewarding. “The generous will themselves be blessed, for they share their food with the poor.” (Proverbs 22:9, NIV).
  • Avoiding high-interest debt. Your loan might spare them from predatory lenders. “Whoever is kind to the poor lends to the Lord, and he will reward them…” (Proverbs 19:17, NIV).
  • Lower interest rates. Family loans often have low or no interest, though IRS rules may treat foregone interest as a gift (Deuteronomy 23:19-20, NIV).

4. How to Lend Money to Family (and Protect Yourself)

If you decide to lend, formalize the arrangement:

  • Decide upfront: lend or give? Clarify your intentions. Proverbs 16:9 (ESV) says, “The heart of man plans his way, but the Lord establishes his steps.”
  • Draft a promissory note with:
    • Loan amount
    • Repayment terms
    • IRS-compliant interest rates
    • Payment methods
    • Consequences of non-payment
    • Signatures and date
  • Keep records to track repayments and interest (Proverbs 4:25, ESV).
  • Seek legal advice for large loans (Proverbs 15:22, ESV).

5. Principles for Lending Money to Family

  • No obligation to lend. You’re not a bank—saying “no” is okay (2 Corinthians 9:7, ESV).
  • Document everything. Written agreements prevent confusion (Habakkuk 2:2, ESV).
  • Ensure spousal agreement. Both spouses should be in sync (Ecclesiastes 4:9-10, ESV).
  • Lend wisely. Don’t lend more than they can repay (Proverbs 3:27, NIV).
  • Plan for worst-case scenarios. Consider what happens if they die or become disabled (Proverbs 27:12, ESV).
  • Avoid nagging or micromanaging. Don’t shame them over spending (Proverbs 15:1, NIV).

6. Questions to Ask Before Lending

  • Is the borrower responsible with money? (Luke 16:10, NIV)
  • Why do they need a loan? Why ask you?
  • Could this damage your relationship if repayment doesn’t happen?
  • Are you ready to forgive the loan if needed?
  • Will lending money jeopardize your financial future?

7. Should You Lend Money to Family?

We generally recommend not lending money to family because of the relational risks. However, there may be times when lending (or giving) is appropriate if:

  • You can afford to lose the money without damaging your own financial stability.
  • It won’t strain the family dynamic.
  • You’re genuinely willing to forgive the loan if needed.

Closing: A Biblical Call to Stewardship

Lending money to family is like walking a tightrope—one misstep, and relationships can fracture. Proverbs 22:7 warns that “the borrower is the slave of the lender,” and nowhere is that truer than within family. Before lending, prayerfully consider giving instead—a gift, free of repayment expectations, preserves relationships and reflects Christ’s generosity (Luke 6:35).

If you do choose to lend, document it clearly, ensure your household agrees, and be prepared to forgive the debt if needed. Seek God’s wisdom, consult trusted advisors, and prioritize love and unity over money. That way, you can steward both your resources and your relationships in a way that honors the Lord—and keeps the next family reunion “pickle-free.”

 

 

Next Steps

 

 

Material presented is property of The Stewardology Podcast, a ministry of Life Financial Group and Life Institute. You may not copy, reproduce, modify, create derivative works, or exploit any content without the expressed written permission of The Stewardology Podcast. For more information, contact us at Contact@StewardologyPodcast.com or (800) 688-5800.

The topics discussed in this podcast are for general information only and are not intended to provide specific investment advice or recommendations.  Investing and investment strategies involve risk including the potential loss of principal. Past performance is not a guarantee of future results.

Securities and advisory services offered through GWM, Inc Member FINRA/SIPC