Golden rules for lending money to friends and relatives

Mar 18, 2020 by

Golden rules for lending money to friends and relatives

When a friend or family member asks you to borrow money, you should first think about why they are asking you and not someone else. It is likely that they imagine that your business generates great profits or maybe it is because you are opening a new house or a new car. What they don’t see is your line of credit or how small your profit margin actually is. You must understand the rules for lending money to friends and relatives.

Being a consignee of a loan to a family member or friend might sound like a better idea than delivering a loan directly, however this can end even worse if something goes wrong. As a consignee you are legally bound by the debt. If the debtor does not pay it or leaves town, you will be left with all the payments, with a negative mark on your record and with a friendship in pieces.

A few people just decide not to give personal loans ever. If asked the reason, they reply that they are sorry, but it is their policy not to lend money to a friend.

However, when you use to be thinking to lend money to a relative or friend, it is imperative that you learn these rules into back of your mind.

Discuss other options

Are there other ways you can help him? Money is not always the only solution.

loan to a family member

Lend the amount you might lose only

You will likely never see your money again, so it is essential that you never put your financial well-being at risk.

Be clear about your expectations

Make a payment plan in detail with deadlines and calendar. Discuss about to lend money to a family member to what will happen if something goes wrong or if they cannot pay in a timely manner.

Put it in writing

If it happens to be a loan to the family member or a close friend although, you prefer not to hire probably a lawyer, it use to be significant that there is certain kind of legal promise or assured in some way at least.

Take care of problems immediately

You may feel like you’re being generous by not sending a reminder that your payment is 30 days late, but you’re just looking for trouble. Let the debtor know that you monitor payments and that you are aware of commitments.

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