They say love is all about giving without getting in return. Sure, but if it’s your roommate who owes you money, you can:
- Remind them to pay.
- Set up a payment schedule.
- Forgive them the loan or have them work it off.
- You pay less rent while they pay more.
- Take legal action.
I don’t know about you, but I hate roommates who owe me money and don’t pay up.
My roommate borrowed money from me; this was me doing them a favor.
Why do I have to work hard to get them to pay it back?
Right…now that I have gotten that off my chest, I’d like to share 10 of the best, carefully-researched and tested ideas for getting your money back from a roommate who owes you.
1. Clear up any questions
Are you sure your roommate owes you money? Perhaps they paid it back and you forgot?
What about how much they owe? Maybe there’s a miscalculation or a partial payment somewhere.
Fortunately, today, there is virtually an app for everything.
My research shows that they have good reputations, and my colleague, Ian has used Splitwise and says it’s really good.
Splitwise is based in Providence, Rhode Island, and has been written up in sites such as Lifehacker , The New York Times , and MSN Money .
Venmo is a service of PayPal.
Top tip: Using simple loan agreements is a great way to keep things clear.
Several years ago, my current husband and I decided to buy a house. My half of the payment was a loan from my ex’s father.
He typed up a letter which we both signed. The letter had the amount borrowed and the interest rate we had agreed on. I got the original. He got a copy.
Do-It-Yourself Loan Agreements
Agreements about lending money to roommates (and people in general) should be in writing. You can use free, online templates such as this one but the basic items are:
- Amount being lent – in numbers and in words: ex. $100 (one hundred dollars)
- Repayment date(s)
- Interest charge for overdue loans (optional)
- What happens if the borrower cannot pay the loan back—make sure this is not excessively unfair as it can be seen as usury (moneylending at unreasonably high interest rates) and stop a court from being on your side
- The wording that you have both ‘read, understood, and agreed to the agreement’
- Names in block capitals with signatures beneath
- Dates as required
- Copies for everyone
In addition, the loan documents should be notarized. A notary will witness all the signatures to the documents. In that way, no one can say that they didn’t sign the document, and someone else forged their signature.
Here is a link to the member’s directory of the American Association of Notaries.
Of course, for larger amounts, you should see a lawyer, but their charges make it uneconomic when lending relatively small amounts to roommates.
If it’s more casual, such as for a smaller amount, at the very least have someone as independent as possible to witness the document. Put in the document a section saying the witness has seen it being signed and agreed to by both parties. Then they put their signature, name in block capitals, and postal address on this part of the document.
2. Remind them…FREQUENTLY
Let’s not say ‘nag them’ or ‘guilt them into returning your money’.
We are trying to be more gracious than that.
Basically, you should ask them when they are planning to pay back the money they owe you.
Each time the agreed ‘pay back time’ has passed, immediately contact your roommate with a reminder that they said they would pay by now.
If your roommate owes lots of people money, the first person they will pay back is probably the one who pesters them the most—make sure this is you!
After a few casual reminders (about 2-3), begin reminding them by certified mail, return receipt requested. Certifying a letter gives you proof of sending. Return receipt gives you proof of delivery.
Yes, snail mail…actual paper, pen, envelope, stamp, post office….like in the ‘old days’.
Certified letters prove that you communicated with a person when you say you did. This sets the stage for more serious action later…and just might be enough to get you your money back.
3. Set up a repayment schedule
Perhaps your roommate fully intends to repay the money they owe you but it’s difficult for them financially—which is why they borrowed it from you in the first place.
Better for them to pay you back over time what they can afford to rather than not pay you back at all.
Have an open but non-threatening chat with your roommate. Explain that you know money is tight for them right now, but you, yourself, need the money.
(Even if you could manage without it for a while longer, you are allowed this ‘white lie’. It will motivate your roommate. They will feel that they are ‘helping’ you out. Whatever works, right?)
It may seem like nothing, but the small sum of $5 a week quickly adds up—and it’s way better than zero.
Top tip: At this point, I just want to remind you that no matter how much they beg, plead, or threaten, do not lend your roommate more money. It could be that you will never get your money back, so the smallest amount lost would be the best.
If they argue, say that:
- You value your roommate’s friendship, and lending them money could damage it. Experience has shown you how lending money to friends unfortunately never works.
- You wish you could, but need the money, including what you have already lent them.
- Sadly, as they have not paid you back when said they would, you can’t do it again.
And speaking of saying ‘bye’ to the money….
4. Be gracious
If it was a one-time thing, not likely to happen again, really helped your roommate out of a tight spot, and you can afford it, you could decide to gift your roommate the money they owe you.
Seems totally nuts, I know, but everyone needs an ‘angel’ in their life once in a while. You could be an angel for your roommate.
5. Your roommate does the housework in place of paying back their debt
Are there services you purchase or use your time for which your roommate could provide instead?
- You get a mani/pedi twice a month.
- You pay someone to iron your work shirts.
- You have a dog walker.
- You need to do your share of the cleaning.
Instead of paying others for these services or using your time to get them done, your roommate does them instead.
The money you save goes to reducing their debt to you. The time you save frees you up for things you might not usually get to—which is an important ‘payment’ in itself.
6. Reduce your monthly rent payment
I found lots of cases online in which roommates owe rent money. Here’s a popular suggestion.
Let’s say you pay $1000 rent per month and split it 50-50, so each of you are paying $500.
Last month, you paid your roommate’s share of the rent, so they owe you $500.
Together with your roommate, agree on a different split until the money they owe you for rent has been repaid.
Perhaps you will pay just $400 per month of the rent for 5 months to make up your roommate’s unpaid rent, so your roommate is effectively paying you back $100 per month.
When you set up this agreement, be firm. Make sure your roommate knows that any late fines from the landlord are going to be on your their account. You are paying your new share, and that’s it.
7. Hit up the guarantor
Many landlords require that each name on the lease has a guarantor —a person who guarantees the rental payment if the tenant cannot pay.
What does your roommate agreement look like?
Is it a rental contract with a landlord and a guarantor?
Perhaps it’s an agreement between you and your roommate with their parents or friends having their ‘financial back’?
If there is someone else involved who can pay back the money your roommate owes you, go for it.
They signed; they are responsible.
Maybe the guarantor is your roommate’s parents who won’t like that their child owes other people money like this and so might pay you back as a result.
8. Write a demand letter
This formal letter sets out the facts, requests a specific solution by a specific date, and explains what will happen if the situation is not resolved by then.
The tone of your demand letter should be polite, even friendly, but firm.
Type it, print it out, and send it certified mail, return receipt requested.
This demand letter template is a good place to start.
9. Try mediation or arbitration
Professionals could help you get back the money your roommate owes you.
Mediators work with both sides individually and then collaboratively (together) to try to reach an agreement.
Mediators do not make judgments or force either party to accept their decisions; they help both sides to try and find an agreement. They can be great to help you do this, but be careful because a mediator is trying to get you both to agree, and to do this may cause you to compromise on something you later regret, such as writing off some of the money your roommate owes you.
Arbitrators are similar to judges in that they hear evidence and make legal judgments (legal decisions). So it’s different from mediation because the arbitrator is making judgments. It’s like going to court, but with fewer rules, so it’s a quicker process. You can have it be binding or non-binding; a court can enforce the binding kind.
The research shows that both mediation and arbitration are very successful methods for resolving many types of situations, including financial ones.
10. Sue your roommate for the money owed you
Remember those snail mail, certified letters in Tip 2 you wrote to your roommate about the money they don’t want to pay back? That demand letter you sent in Tip 8?
Now is the time to get out all your post office receipts.
You are taking things to the next level. It’s time to sue your roommate’s a**.
Chances are, you will be suing your roommate in small claims court.
How much can you sue for in Small Claims Court?
The Small Claims Court Limit varies by U.S. state. In other words, there is a limit to the amount of money you can sue for.
The lowest maximum limit in any state is currently $2500—this means you can sue for up to $2500.
In some states, the small claims courts allow you to sue for higher amounts. You can check the limit per state here .
Hopefully, even if you are in a state with the smallest amount ($2500), it will cover the money your roommate owes you.
Small Claims Court Basics
This NOLO article has lots of good information about using the small claims court, but here are the basics:
Statute of Limitations —You need to file your claim within a certain time frame. This varies by U.S. state.
Filing Court —The court closest to your home is the one you should use.
Lawyer or not —Usually, the small claims court allows you to use the services of a lawyer. However, for these relatively small financial amounts, legal services will cost you more than the money you are owed.
Consider that the filing fee will be between $20 – $200. Also, you will need to put in some time to organize your facts, and perhaps take a day off work to appear in court.
But that’s it.
Many people succeed on their own in small claims court, and the research shows that you can also.
Getting Paid —Even if the judge rules in your favor, you still might not get paid. Small claims courts do not handle collection of monies owed.
However, small claims judgments can be made valid for 10-20 years. So, even if your roommate cannot pay you the money they owe you NOW, the judgement will hang around waiting for better times.
If your amount is too large for the small claims court, you will have to use the large claims (or circuit) court. Each state circuit court is slightly different. An online search will quickly give you the info you need.
Top tip: Suing your roommate to pay back the money they owe you should be your last resort.