It is really true to state that getting hit up a loan can easily make you feel like you are actually stepping into minefield. In the present economy, it is always super easy to just understand how someone might find themselves in dark place financially. Then you have this set of mind when you might want to help out your near and dear ones who are in need of some monetary help to work their way out through critical situations or crises.
Then, if you check the other side of the coin, you might have heard stories about the loans which gone wrong with families torn apart and friendships turning upside down for the worst. There are high chances when you might be depleting funds that you might need for your own use. Even when you are cent percent sure that the asker is going to pay the money back within due time, it is also hard to know if you might want to proceed and take out this venture or not.
In order to help you out in this regard to make the actual right choice that you won’t regret later, there are some financial experts ready to share major things to consider before actually cracking open the wallet.
How to lend money to friend or family lawfully
Just be sure to approve only if you mean it and not forcefully:
If you are feeling guilty tripped into just making the loan by asker or just questioning the own hesitation, then you should know how to refuse lending money to a friend politely. Always be sure to give the money when you genuinely approve it from your heart.
- If you actually cough out cash when you are not sure that you might want to, then you might feel resentful in making this decision and that might easily cripple relationship before it is even time for her to repay the amount that person owe to you.
- Always remember that not going through the loan won’t make you a bad friend or selfish in any way possible. The response might actually help in protecting the bond and not ruin it for good.
- You can graciously decline with sentiments such as you really want to help but fail to have that extra money to give out as loan right now.
- If you think that you might have to explain yourself a bit further, then you can easily mention unexpected expense you were hit on recently with like higher forms of health insurance premiums, or some plans to save for your kids in future like college education and more.
- For the thoughtful next move in this regard, you can offer to help brainstorm some of the ways to bring down debt and other areas from where the person can get some loan. A true relative or friend might be willing to accept some advices from you and will thank you in return for the added help. In case, the person does not, then it is better that the relationship sours before you have to forked over funds.
You can lend the amount you can afford to lose and not more by a single penny:
Your family member or friend might check all boxes for being financially stable, trustworthy and reliable, but bad things can happen anytime. Any situation can take place which can prevent them from paying the amount back originally owned. This is a point, which most of the certified financial planners can provide you with.
- In case, the loanee gets in bind, then a family member or best friend is likely to be relegated to end of payback line. That money will come right at the end of the line, and right behind credit cards, Mortgage Company, auto loans and more.
- You can easily imagine the stress level you have to go through during such instances and the tension that might raise between you both if you need the money and she will not repay it to you.
- So, the bottom line over here is to be prepared for that beforehand. Be always prepared for the worst by giving only an amount, which won’t hamper you much if it fails to return to you. It should not jeopardize the savings goal, relationships and other bill paying abilities.
Make sure to create one firm repayment timeframe:
There are so many instances when someone might have given a hefty amount on loan to close relative for any use, without discussing repayment date for the same. But, not everyone will be so kind towards you. There are so many people out there in the market, who can actually change mind once they get hand on the money. Just because they took money from close family member or friend, they think it to be not necessary to repay them back within due time.
- So, the only way out of it is to get a strict timeline down for repaying the money. Yes, it might sounds a bit businesslike and might feel the same way, but it is a proven way to get your hard earned money back. You can further mentally prepare yourself for the time to wait till you can get your own money back.
- You have to discuss so many points and not just the timeline with the person before giving the loan, no matter how close he or she might be. You have to discuss the amount of loan you will give, interest rates related to it and the tenure period to go with it.
- It will help the person to know your worth and even the worth of the money about to get. So, the loanee can easily prepare for the time and can repay the amount when it is right time.
If you can follow these points, it won’t be difficult for you to get money back from friends or family members once you have loaned them for their use.