When a friend asks for a loan, is it OK to ask why the money is needed?

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Yes. Always ask. You’re setting yourself up to be treated like an ATM if you don’t.

A loan from a friend should be part of an act of repentance. They couldn’t make it work under their own steam, there’s a reason why they couldn’t make it work, you need to be a part of the solution and not part of the problem.

Asking them why, making them own up to the sequence of events that led to them asking you for your hard-earned money, is necessary to that process.

If a beggar asks me for money, I don’t bother asking him what he’s going to use it for, and I don’t really care. If you’re at the point where you’re asking strangers for money, you’re far far beyond the point where a friend can help you.

But if you can talk it out with a friend, then maybe you can come up with a solution together for their problem.