Damn If You Do and Damn If You Don't

"A man devoid of understanding shakes hands in a pledge, and becomes surety for his friend." Proverbs 17:18 (NKJV)

Juan applied for a loan in one of the financial institutions in the United Arab Emirates. As practiced, before the financial crisis, most financial institutions are lending at 10 to 20 times ones salary. As long as you have your payslip and your employer's certification you can avail of the loan. One more intriguing requirement to be submitted is a co-signatory of the loan.

Since Juan is now ready with the documentary requirements showing proof of employment and salary, he approached Pedro as his co-signor. Pedro, being a close friend of Juan openly agreed to become a co-signor or a surety to the loan applied for by Juan.

Many can relate to the aforesaid story. One could relate to either Juan or Pedro. And this piece is mainly dedicated to that of Pedro's case.

Statistics show that more often than not, the co-signor or the surety ends up paying for the loan of the principal. Financial institutions knew it as a statistical fact, thereby requiring somebody who will end up as a sacrificial lamb.

In the story of Juan and Pedro above, the latter had two options. He could say yes or no. If he says yes, then he could be included as part of the statistics and if it so happens, what do you think would happen to the relationship of the two gentlemen? It is simply ruined.

If Pedro says no, two things could happen. First, Juan's loan application would be denied outright unless he could look for another co-signor. Secondly, because of the denial by Pedro, the relationship would no longer be the same again. It would be strained as a logical consequence to Pedro's refusal to become a co-signor.

It seemed that, if one will put himself in the shoes of Pedro, he could be in a situation of damn if you do and damn if you don't. Either way, the relationship will never be the same again if you refuse to become a surety. And when you accepted to become a surety that later on turned out to be paying the principal's obligations, the relationship is ruined.

That explains why the Bible in Proverbs described a person who enters into becoming a surety as devoid of understanding. It is not only that he is inviting himself to become one of the statistics, but allowing a friend avail of a loan where he may not have the capacity to pay. In most cases, these loans are just spent unwisely.

The wisest thing to do then is to never co-sign a loan. Never. Never. Never...

"To Lend Or Not to Lend?"

Have you been approached by a brethren, a friend, or a relative and asking you "can you lend me a few bucks?" How have you reacted? What was your response?

This scenario is not uncommon to most, if not all of us. In most cases, this type of a scenario ends bitterly as relationship has now shifted to one being a slave to the other. (Proverbs 22:7)

The three common reasons I have observed why a brethren, a friend or a relative borrows:

• To pay-off a maturing obligation from credit cards, bank loan, or worst from loan sharks, while his or her cash will only be available in the next couple or so days.

• To augment the available fund use to pay an item he or she purchased that accordingly is a discount purchase of something he or she thinks a necessity (in most cases are stuff that one can live without like a cellphone) while his or her salary or loan application will not be released until the next couple or so days.

• To be used for a necessity, like an emergency that happens in a family such as, but not limited to purchase of medicine or for hospitalization.

The reasons could be numerous and varied, but will most likely revolve around these general cases. Whatever it falls into one should take extra caution in just pulling out your cash on the wallet and indiscriminately give it to your friend. You may putting friendship as more important than money as you empathized with the need.

However, you might consider another angle on this scenario. Have you not thought that in giving in with their request and lending them with your extra cash, you are just aggravating their problem.

The worst thing you would do is to borrow in order to lend to your friend. Or sign as a guarantor for your friend. But, these things will be discussed in a separate topic soon.

You may consider the following before lending your precious cash, again with the assumption that by doing so will not strain your own budget:

• You are not teaching him or her to get out of debt and manage his or her finances wisely. As you lend to someone to pay off the maturing debts, and once his or her cash is already available your money could either be paid back as promised or payment postponed. If the former case happens, well and good, but remember there will always be next time until the amount borrowed will gradually increase. If the latter case happens, just pray and be ready for the event that such indebtedness will be forgotten due to its continued postponement of payment. In short, you have not dealt the problem, which is the mismanagement of your brethren, friend or relative's finances, worst you have taught him or her to even get into trouble.

• If it is for purchase of a stuff, you are approving of his or her addiction to indiscriminate shopping. You are allowing him or her to purchase some luxurious items, that without it, he or she could still live. Instead, why not advise him or her the virtues of saving.

• As for the third, you may double check on the claim that the money being borrowed is really for a legitimate need. There are a lot of people who are just making up stories for them just to get what they wanted. Your cash. Granting it is a legitimate need as claimed it to be, then by all means, provide help and not a loan. Make sure that the help you will provide will not strain your budget, no more no less.

The next time your brethren, friend or relative would approach you for a loan pause, gather enough information and ask: "to lend or not to lend?"

You may also remember this quote from William Shakespeare in his literary work Hamlet: "neither a borrower nor a lender be, for loan oft losses both itself and friend."

Nobody But YOU

Hmmm...for those who knew the song might have already been singing the tune. I can even sense someone is dancing while singing the tune. What comes to your mind upon reading the title might be the famous danceable song by a Korean girl group, wonder girls.

I may have been singing and dancing with this song the last couple of days with my daughters and in front of my wife. However, a deeper meaning of the phrase kept bugging me for the past week.

I have been consistent with my articles on personal finance every week for quite sometime now. It have been a fixture in the daily newsletter of our church, Word International Ministries - Al Ain (WIN-Al Ain). Some online friends had even featured some of my articles in their weblogs. And a number of personal messages I have been receiving are very encouraging to continue on to come up with more articles about personal finance.

My articles, as well as those of the famous authors and bloggers out there are very encouraging. There are even a lot of books and other multi media materials available out there that will fix your financial woes--that will, as they say, reveal the secrets to become rich and being debt free. But, mind you, these are all inutile if these are only read and not taken to heart.

Taking to heart all these materials available means that you should realize that an overhaul of oneself is necessary to make these materials effective.

This piece you are reading right now is especially addressed to those who are deeply in debt. You may have been seeking for somebody whom you could ask for help, in terms of advice or financial help. There are so many people who are willing to help, but their efforts to help will only aggravate your situation if you will not address the real problem, YOU; and not the lack of money.

I may sound so mean here. But, let me pose these questions:

• who caused you to be deeply in debt?
  
• who used that plastic money called credit card?
  
• who decided to buy a luxury car instead of an ordinary one that could still serve the same purpose?
  
• who bought those unecessary and expensive stuffs that is way beyond one's income?
  
• who went to some place as tourist using credit cards as the means of paying that luxurious vacation and having nothing in your account to payoff the bills after 45 days?

Those list could go on and on and the resounding answer is one and the same. And you answered it correctly. YOU.

The real source of the problem is your attitude towards money and the way you spend it. Hence, there will be no amount of advice, tips and techniques on how to free from debt to take effect without first dealing your attitude.

If you are in debt right now and badly needs help, be it counseling or financing, or a combination of both, please humble yourself and accept the fact that the real problem is not your debts. Not your neighbor. Not your brethren.

Then who? Nobody, but YOU.