How To Get a $65,000 Loan Back From Your Friend

In 2006 I lent $65,000 to my friend’s brother with the agreement that in three years he would pay me back $94,000.

He was investing in land, I had some extra money and I trusted my friend, who would also be co-signing the deal. We signed a promissory note and off he went to invest.

Turns out 2006-2009 wasn’t the best time to invest.

Note: This wasn’t the most responsible money decision I’ve ever made and it taught me a lot. I’m not advocating hard money lending but I am sharing this story for anyone that finds themselves being owed large sums of money.

I got a call a few weeks before the money was due back to me.

“I need more time” Then a few months later… “I need more time”. A few months later… “I need more time”.

You get where this is going.

A year passed since the money was supposed to be returned so I talked to a lawyer and asked what my options were.

He said the best thing to do would be to have my friend and his brother sign a consent judgement, which is basically a way of suing someone without going to court. It would legally acknowledge that he owed me money, then if he sold any property it would flag the judgement, and the state would order him to pay me first.

We went ahead with the paperwork, but it was just a formality. He would pay me when he wanted to, and there was nothing I could do about it.

So I waited. And emailed. And waited. And emailed.

Still I hadn’t seen a single dollar from my investment.

Fast forward three years to 2012 and there’s an opportunity that I need $13K for, and I really don’t want to lose it. I decide to go to my friend and his brother to see if I can get that amount, instead of the full $94K. I make a deal that if they can get 15K to me in one month, I’ll lower the total amount they owe me to just the principal ($65K), plus the fees from my lawyer.

They agree, and a month later $15K is wired into my account. This was a huge win, and even though it was only a fraction of the money promised, it was an incredibly important step.

Over the course of the next three years, we made a series of small deals, usually between $10K-15K and every time the money was sent on time, with no excuses. Now it’s 2015 and I’ve received $50K of the $65K back, and I expect the last payment early next year.

Looking back, I’m thankful for the lessons learned and the disaster I avoided.

There were a few factors that helped me not turn this into a financial, or mental nightmare, and they are worth sharing because they go against the common wisdom about how to get people to pay you back.

Lesson #1: I didn’t get angry

The truth is I was powerless to make them pay me back, even with a court judgement. Getting angry would only make things worse, and unless I was willing to go all the way and hire someone to break some legs, keeping my composure got me a lot further than hostility.

Although I had plenty of reasons to be upset, I didn’t blame anyone and I didn’t cry about how unfair it was. I made sure my friend knew that in my eyes, he was still a good person and had my absolute respect.

That may seem like me being a pushover, but I believe when we write someone off it always makes the relationship worse. I had a choice, and I knew that if my friend had nothing to lose, he would have less motivation to pay me back than if his dignity was still on the line.

To this day we are in good standing. Every time he sends a payment, I let him know how much I appreciate him. He’s a person just like me, and feels bad about how the deal went, so these little words mean a lot to him, as they would to me if I were in the same position.

I believe people will work hard to keep their dignity, as long as you don’t take it away from them first.

Lesson #2: I considered the money lost

I didn’t share this with my friend or his brother (until now), but this was how I related to money. I considered it gone, and I moved on.

This deal had already spoiled my finances, why would I let it spoil my sanity as well? It wasn’t worth it, plus stressing about it wouldn’t get me closer to actually getting the money back. I took the necessary steps, then I moved on with my life.

One of the things I did which ultimately was a mistake was count on the money being there for certain times in my life. That ended up having me spend more and go into debt, assuming the money would come back “any day now”.

Had I considered it lost (after a reasonable amount of time) and planned accordingly I would have been better off financially and would have not gone into so much debt.

Lesson #3: I set up little wins

I realized in 2012 that it was much easier to get $15K than it was to get $94K all at once. This is something collectors have figured out a long time ago, which is why when you owe money they do their best to get some payment from you, even if it’s not the whole amount.

Asking for little chunks now was a far better strategy than waiting for the full amount, and it was well worth cutting into my profits to see the money sooner. If I hadn’t done that, I might still be waiting today.

My Sanity Is Priceless

During this whole process, I had plenty of chances to get upset, but I didn’t. I remembered that I always had a choice. I could choose to see everything as an opportunity, and be with the reality of the situation, or I could give in to my projection of how it was supposed to be and complain.

Not having the money come through on time was in many ways a gift. It helped me get honest about my monthly in and outflow of money, and it taught a very valuable lessons about investing money, lessons I had to learn the hard way. The thought “it’s not fair” was my worst enemy, and I had no interest in going down that road, no matter how tempting it may have been at times.

My sanity is priceless, and so is yours.

If you ever find yourself in this situation, even if it’s just $100, I would want you to honestly ask yourself this question. How much is your sanity worth?

At the end of the day, no matter how much money we are owed we can’t forget that what we really want is peace of mind, and nothing is worth giving that up for.

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