How to Lend Money to Family or Friends – Before giving a loan to a loved one, consider these rules to preserve the relationship … and take care of your finances.
When a friend or family member borrow money from you, you must first ask yourself why he or she is asking you for it and not someone else. They are likely to think that your business will generate significant profits, or maybe it’s because you’re going to create a first at home or in a new car. What they do not see is your line of credit or your profit margin is really very low.
If a beneficiary of a loan to a family member or friend may seem like a better idea to give a loan immediately, the situation may get worse if something goes wrong. As the recipient, you are legally bound by the debt. If the debtor does not pay or leave the city, you keep all the payments, with a negative number for your story and friendship in pieces.
However, this did not prevent many entrepreneurs from learning hard that family, friendship and finances should not be mixed. I met a couple who borrowed $ 20,000 from a family member. The money was probably used to pay a mortgage, but they used it instead to buy iPhones and cosmetic surgery for women. They never paid the loan.
Think twice for the potential problem
It’s clear that not all loans to family and friends are catastrophic, but the potential problem is so serious that you have to think twice before saying yes. To avoid regrets, you must determine in advance how you will handle all possible problems. especially ask yourself what would happen if your family or friend do not pay the loan. How would this affect your finances and your relationship?
Some people just never decide to provide personal loans. When asked why, they say, “I’m sorry, but my policy is never to borrow money.”
But if you’re thinking of lending money to a friend or family member, it’s important that you take these rules How to Lend Money to Family or Friends into account. You will appreciate it:
1. Discuss other options
Are there other ways to help? Money is not always the only solution.
2. Borrow only the amount you can lose
You may not find your money. It is therefore essential to never compromise your financial health.
3. Be clear with your expectations
Establish a detailed payment schedule with timelines and timelines. Discuss with the person to whom you will borrow what will happen if something goes wrong or you can not pay on time.
4. Write it in writing
Although, if it is a loan to a family member or close friend, you would probably prefer not to hire a lawyer, it is important that there is a legal commitment or agreement that gives a guarantee.
5. Deal with the problems now
You can feel generous by not remembering that the payment is 30 days late, but that you only pay attention to problems. Inform the debtor that you are monitoring payments and that you are aware of the commitments.