How to lend crypto to a friend.

TL;DR. Lend a friend only what you could lose without resenting them, agree the amount, rate and deadline before any money moves, and set the rate from what the loan costs you, not from what feels polite. Doing it on-chain records those terms publicly and lets a smart contract track every repayment, which removes most "I thought we said" arguments. It cannot make a friend repay: there is no collateral, no collector and no court built in. Half of US adults have lent money expecting it back, and 42% of those who did lost money. If you cannot treat the money as a possible gift, a loan is the wrong tool.

This article is general education, not financial, legal or tax advice. Rules on interest, gifts and tax differ between countries; the tax example below is US law only. Check the rules where you and your friend live.

Should you lend crypto to a friend at all?

You should lend crypto to a friend only if losing the money would not end the friendship, because personal loans go wrong often. In a Bankrate survey of 2,502 US adults in August 2024, half said they had lent money to someone expecting to be paid back. Among people who had lent money or covered a group expense expecting repayment, 55% had a bad outcome: 42% lost money, 24% said it harmed the relationship and 9% said it damaged their credit score.

Crypto does not change the basic risk. It adds a few of its own. The money is usually a stablecoin, a token designed to track the US dollar, so the loan also carries the risks of that token. Every transfer is final, so a payment sent to the wrong address cannot be pulled back. And on a public blockchain, the loan is visible to anyone who looks at either wallet.

What crypto does offer is structure. A loan made through a smart contract has written terms by default, holds the money until both sides have agreed, and keeps an exact record of what has been repaid. For many friends that structure is the useful part: it turns a vague favour into a clear agreement that neither side has to remember.

How much should you lend a friend?

You should lend a friend no more than you could afford to lose entirely, because a personal loan has no collateral and no collector behind it. The useful test is not whether your friend means to repay. Almost everyone does. It is whether you could absorb the loss if something in their life went wrong.

Personal-finance writers put numbers on it. Financial Samurai suggests a hard limit of lending "no more than 2% of your net worth" to friends and family, calls 5% the upper limit and treats 10% or more as far too much. Your own number depends on your savings and obligations, but the principle travels: size the loan to your capacity to lose it, not to the size of your friend's need.

If your friend needs more than you can safely lend, a crowd loan can help. One request can be funded by several lenders, so you can cover the part you are comfortable with and leave the rest to others, without any of you lending more than you would alone.

What interest rate should you charge a friend?

The interest rate you charge a friend should cover what the loan costs you, which is the return you give up plus the chance of not being repaid, and nothing obliges you to charge more. Many people lend to friends at no interest at all, as a favour. Others charge enough to break even. Few charge what a stranger would.

A common rule from personal-finance writing is to stay below what a bank would charge. Financial Samurai's advice is to charge at most "1-2% above what a bank would charge for a personal loan" and usually less, so the friend is better off borrowing from you. At the other end, it argues that a lender deserves at least what the money would earn in a 10-year US Treasury bond.

Default risk is the part friends rarely price. If there is a chance your friend cannot repay, a rate that looks generous may not cover it. With nothing recovered on a default, a loan breaks even in expectation when the chance of not being repaid equals r / (1 + r), where r is the interest for the whole term. How DeFi interest rates are set works through the same arithmetic for lenders who price many loans.

On our contract, a lender's offer can carry any rate from 0% up to the maximum APR the borrower set, and the protocol keeps 10% of the interest a loan pays, never any principal. An interest-free loan to a friend pays no fee at all.

The table assumes a one-year loan, simple interest and nothing recovered on a default. A three-month loan earns about a quarter of that interest, so its break-even chance is about a quarter as large. The point is not the exact figure: it is that a friend's loan at 5% only pays you more than it costs if you are very sure of repayment.

Does charging no interest have tax consequences?

Charging no interest can have tax consequences in some countries, and the US is the clearest example. US tax law treats a loan below a minimum interest rate as a "below-market loan" and can tax the interest that was not charged as if it had been paid. The minimum rates, called applicable federal rates, are published by the IRS each month.

There is an exception for small loans between friends and family. Under section 7872 of the Internal Revenue Code, the rule does not apply to a gift loan directly between individuals on any day when the total outstanding between the two of them is $10,000 or less, unless the money is used to buy or hold income-producing assets. Above that, the details depend on the amount and the borrower's investment income.

Two more points apply almost everywhere. Interest you receive is usually income you may have to declare, and forgiving a loan can count as a gift. Because the rules are national, check them where you live, or ask an accountant before lending a large sum.

What should you agree before any money moves?

Before any money moves, agree everything you would otherwise have to guess later. Most arguments over personal loans are not about whether to repay but about what was promised, so settle these points in plain words first.

• The amount and the token. How much, and in which stablecoin, so that you both mean the same dollars.
• The rate. Zero, a break-even rate or something more, stated as an annual rate.
• The deadline. When the whole loan should be repaid, and whether part-payments along the way are expected or simply welcome.
• Early repayment. Whether your friend can repay early. On a crowd loan they always can, and pay interest only for the time they held the money.
• Lateness. What happens if a payment is late: a conversation, a new date, or simply more interest.
• Other lenders. Whether your friend may accept offers from people you do not know on the same request.

How does a loan to a friend work on-chain?

A loan to a friend works on-chain when your friend publishes a loan request and you make an offer on it, with a smart contract holding the money until the terms are met. On a crowd loan, the steps are the same whether the lenders are friends or strangers.

• The request. Your friend publishes the amount, the most they will pay as an APR, how long the request stays open for offers, the repayment deadline, and which stablecoin the loan is in.
• Your offer. You offer an amount at your chosen rate, at or below their maximum. Your money moves into the contract and stays locked while the request is open for offers.
• Acceptance. Your friend picks which offers to accept, whole or in part, as long as the total reaches at least 80% of the request. If you are the only lender, your offer has to cover that 80% on its own, so agree the amount together first.
• The loan. Accepted money goes to your friend and interest starts, accruing every second at your rate on your share. Any part of your offer that was not accepted can be withdrawn.
• Repayment. Your friend can repay any amount at any time, with no penalty for repaying early. Each repayment pays interest first, then principal, and you claim your share from the contract; nothing is sent to you automatically.

One feature matters for friends in particular: the request is public, so other lenders can make offers too. Your friend still decides which offers to accept, so a loan funded only by you remains possible. How Unlloo works today sets out the rules in full.

What does putting the loan on-chain change?

Putting the loan on-chain changes how clearly the terms are recorded and how the money is handled, but it does not change who carries the risk. The comparison below is between a loan agreed in conversation and paid by transfer, and the same loan made through a crowd loan contract.

An on-chain record is not the same as a signed loan agreement, and wallets do not carry names. If the sum is large enough that you might ever want to rely on it outside the blockchain, a short written note signed by both of you, naming the wallets, costs little.

What happens if your friend cannot repay?

If your friend cannot repay, nothing on-chain forces them to: there is no collateral to take, and the lenders recover only what is repaid. After the repayment deadline, the contract keeps adding interest at your rate, anyone can mark the loan as not repaid in time, and your friend can still repay late. What happens if you don't repay a crypto loan explains the options lenders have outside the contract.

The human side matters more than the mechanics. Talk early, before the deadline rather than after it. Partial repayments are allowed at any time, so an agreed slower schedule works without changing anything in the contract. Someone else can also repay on your friend's behalf, which helps if a relative wants to step in or your friend's own wallet is unavailable.

If the money will not come back, decide deliberately whether to forgive it. A loan left hanging tends to hurt a friendship more than one that is openly written off. Before you lend at all, read the risks that come with lending through a contract, from the token to the admin key.

When is a gift the better choice?

A gift is the better choice when being repaid matters less to you than the friendship, or when you suspect repayment would be a strain. Financial Samurai notes that for a very close friend it might simply write a loan off as a gift. That is not a failure of the loan; it is choosing the right tool.

• The amount is small. The effort of terms, tracking and reminders can cost more goodwill than the money is worth.
• Their situation is unstable. If repayment depends on things going right for them, a deadline adds pressure at the worst moment.
• You would resent a late payment. If you know you would, a loan puts the friendship at risk for the sake of the money.
• You want nothing public. A gift sent from one wallet to another is still visible, but it carries no public terms, deadline or late flag.

A loan is the better choice when you both want it to be one: the amount matters, your friend wants to repay on clear terms, and you are lending money you could afford to lose. Then a written, tracked agreement protects the friendship rather than testing it. For the wider risks of lending crypto, see is it safe to lend crypto?, and for choosing the token, can a stablecoin freeze your loan?

Sources

1. Bankrate, "Survey: Americans think money is more taboo to talk about than their political or religious views", 7 October 2024, fieldwork 28 to 30 August 2024. The share of US adults who have lent money, and the outcomes for lenders.
2. Financial Samurai, "Lending Money To Friends And Family: How To Determine When It's OK", updated 17 August 2026. The 2% and 5% of net worth limits, the rate relative to a bank and a Treasury bond, and writing a loan off as a gift.
3. US Code, Title 26, section 7872, "Treatment of loans with below-market interest rates". The $10,000 exception for gift loans between individuals and its limits.
4. Internal Revenue Service, "Applicable federal rates", read on 25 October 2026. The monthly minimum rates for below-market loan rules.