What to consider before lending money to friends and family

What to consider before lending money to friends and family

It’s natural, of course, to want to help friends or family in need. Lending money can sometimes turn into an uncomfortable situation, so consider these things before you do so.

Only lend what you can afford to lose

This is the golden rule of loaning money. You should always bear in mind that even the most responsible person you know, can have unexpected problems, and really not be able to give the money back. 

This is why you should only lend what you can afford to never see again. This way, if the worst happens, it won’t end up harming your personal finances or relationship.

Consider how the rest of your family might react

Even if you have a real reason to do it, it may be hard to not treat all the members of your family the same way. If, in the past you have said no to one of them, saying yes to another may bring trouble.

The best way to avoid this is to keep these arrangements private. That way, you can help someone without hurting someone else’s feelings.

Spell out the term clearly

You might want to charge interests or you might not. You may be willing to lend money for a long time or you could need to get it back soon. All these things should be talked over in advance and left clear before you loan the money. This way, you can avoid trouble that could be caused by any misunderstanding.

Talk things over with your partner

You surely don’t want a kind action to end up in marital distress, so talk this over with your spouse. You should both agree so the situation won’t créate friction at home.

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