Lie #2: If you loan money to friends or relatives, you are helping them.
We have probably all experienced loaning money to someone and finding that the relationship had suddenly changed. You are just helping out a friend , so why should that happen? Because as the Proverb says, 'the borrower becomes servant to the lender.' Let me give you a couple of examples.
Years ago, I remember having a friend that was down on his luck and I had a decent job at the time. He had asked me for a few dollars to live on until payday, when he would pay me back. Payday came and went a few times, with no repayment. Although I didn't mention it, he started to avoid me. Even though I didn't want it that way, he felt shame and guilt about not being able to pay me back and it had created a split in our friendship.
My dad was still alive at that time, and I happened to mention the situation to him one day. In his understated way of explaining things, he simply told me never to expect money back when you give it to someone. He was right. The only way I could get the friendship back was to go and tell my friend that the debt was forgiven, a gift. Since, I didn't want him to feel that he was taking a handout, I put two stipulations on it. First, forward the gift to another person someday when he found them in need and second, don't make the mistake I had of loaning friends money. This removed the borrower/lender wall between us and we both learned a lesson. It's okay to give money, but never loan it.
Lending between family members can be even more devastating. A perfect example is the parents who loan the newly married couple the money for a down-payment on a house. Although it may never be said, every purchase that couple makes will be scrutinized until that down-payment is paid back. Any discretionary money that is spent, such as going on vacation instead of repaying the loan, will bring resentment. These types of well-meaning gestures have created lifetimes of resentment and are simply not worth it. If the parents can afford to give the down-payment as a wedding gift, that's great. If not, they should offer to help the newlyweds find a way to save for their first home. That's an even greater gift.
Lie #3: You are helping a friend or relative by cosigning a loan
Now, think about this carefully. The reason the bank wants a cosigner is because they don't expect your friend or relative to pay them back, so assume that you will have to. These financiers are begging people to borrow money and have determined your friend or relative can't afford to pay it back. And somehow you know better?
The decision to try and help people this way is purely emotional. We make great rationalizations as to why we should cosign. The parents cosign to buy a car for their teenager so he can 'learn to be responsible.' The only thing they have taught him is to buy it even if you can't afford it.
I made the mistake of cosigning for a loan in my earlier years and learned the hard way. The friend wouldn';t talk to me anymore, I ended up have to repay the loan and it ruined my credit for years. No gain. All loss. Proverbs 17:18 pretty well sums it up, 'It is stupid to guarantee someone else's loan.'