Have you ever lent money to your friends or family? Chances are you’ve been asked, but deciding to lend, or not, can put you into a tricky situation. On the one hand you want to help, on the other, you’re worried about getting your money back or friendships getting torn apart.
To help you come to the right decision about lending money to your friends and family, here are some rules you should stick by before you decide to open your wallet.
Only say yes if you really mean it
Don’t let yourself feel guilt-tripped into lending money. It’s easy to get caught up in the emotions of your loved ones but if you do decide to lend when you aren’t sure you want to, it might leave you feeling resentful and cause you more stress than you anticipated.
If you are finding it difficult to say no, try declining graciously by saying something like ‘I wish I could help, but I don’t have the extra money at the moment.’ By saying you can’t help (rather than you don’t want to help), it doesn’t damage the existing relationship, and you might then be able to offer advice, rather than money, to try to solve the issue.
Give only what you can afford to lose
So if that is £0, then don’t lend at all! You might trust your friend or family member but you can’t count on unforeseen circumstances that may stop them from paying you back as planned. If you are in a position where you can help, only lend what you know won’t leave you in dire straits if you didn’t get it back. Make sure you can still cover your own saving goals, bills and debts first.
Set the repayment timeline
Before you lend, make sure both parties know when, and how the money will be repaid. Don’t make the mistake of thinking that you are both on the same page when it comes to repayment. Nail down a schedule and stick to it. By having a schedule there is no chance of the borrower mistaking the money as a gift or any confusion that you expect it to be paid back.
Get it in writing
Always get any agreement in writing. It doesn’t need to be a complex contract, but include the relevant parties, the loan amount, the agreed payment schedule and final repayment date and both signatures. Should you want more cover you can get a notary to view the signing of the documents.
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