What To Consider Before Lending Money To Family And Friends
Times can get tough, and when finances are tight, your loved ones might have no option but to turn to you for help. When this happens, it can be hard to refuse them or send them away. However, money issues can be one of the major things that drive loved ones apart. Evaluating the possible outcomes before parting with your money would be best. This is because there is a probability that your loved one will not pay you back, straining your relationship. Consider these before lending to your friends and family.
1. Lend an amount you can afford to lose
If repayment is off the table, you want to be secure in the knowledge that the money you loaned is an amount you can afford to lose. In this case, the money becomes a gift. Consider your financial constraints and lend responsibly. Make it more of a logical decision than an emotional one so you don’t experience financial difficulties. For instance, if a friend asks for a certain amount of money, you can offer to give them a quarter or half of the requested amount if you cannot give it.
2. Lower your expectations
In most situations, you might not get your money back when you lend it to your loved ones. Manage your expectations, so you don’t feel disappointed or angry when that happens. Some of your loved ones might keep to their word and pay back but expect a slow repayment. Due to your relationship, your family or friends might not consider a loan from you as seriously as they would with a bank. Also, you can’t expect them to pay you high interest on the loan or accept collateral.
3. Get everything in writing
It might be tempting to deal informally with your loved ones regarding money matters. However, this is not the best way. Money can ruin relationships, so it is best to deal with it. No matter the amount, write it down and state your expectations clearly. Is there going to be an instalment plan for the repayment, or do you expect your loan back in full? How much time are you willing to give to your loved one? Ensure that you both agree on the content of the contract or document before you sign. If possible, ensure that another friend or relative is around to bear witness.
4. Deal with deadlines immediately
If you give your loved one a month to pay back the loan and you realize that the time is up or long overdue, try not to ignore the reminder. You might be holding back to avoid putting them under pressure, but that might not serve you in the long run if you want your money back. Let your loved one know that you are keeping track.
Money can become a dicey issue involving the people we love and care about. Consider these things when lending money so you can preserve your relationships. And if needed, reach out to a credible debt recovery agency to get your money back.
*This is a collaborative post.
