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A very wise person once gave me the best advice ever on lending money to family and/or friends… it went something like this: DON’T DO IT!
However, ’DON’T DO IT’ is easier said than done, after all, we all want to be able to ‘help’ our family and friends, of course we do.
However, if you are going to be the LENDER in this transaction, there are a few things that you need to consider before any money leaves your hands.
The sad reality is that when it comes to lending money to family and friends things can go south pretty quickly if precautions are not considered.
If you are not careful, relationships can be damaged for a very long time and may not be able to be repaired.
So, before you decide to lend out any money to family and/or friends, consider the following:
Are you prepared to allow more time for the borrower to pay you back?
Chances are your borrower may not be able to pay you back as agreed and may need more time. Are you prepared to allow more time for your borrower to pay you back? If you are not prepared to do so, and if you are going to need your money back on a certain date so that you can pay your own obligations, then DON’T DO IT!
Are you prepared to LOSE OUT on all of the money borrowed?
The borrower may decide to not pay you back at all and may make up excuses for not being able to pay you back or may avoid you all together. If you are not prepared to lose out on all of your money then DON’T DO IT!
Do you have a good rapport with the borrower?
If you have trouble communicating with your family member or friend and you think it will be uncomfortable asking this person to pay you back the money he or she borrowed if they default, then DON’T DO IT!
Do you have a short temper?
Anger never solves anything other than letting off steam as a stress reliever. If you are quick to anger then absolutely DON’T DO IT!
As for me, I try to never lend any money to family and friends, but if the time ever presents itself, then I only lend out money with the inner understanding that I am freely lending this money out as a ‘GIFT’, and if I happen to get paid back, then I can only see that as a PLUS.
However, if I do not get paid back, well, I can only chalk-it-up as the price I paid to have discovered how much this person does not honor his or her promise.
You can bet that this particular person will never receive anymore of my money in the future.
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