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Lending money to friends and family can invite unnecessary headache🥵
The Do's & Don’ts of lending money to friends and family 🧵⬇️
The Do's & Don’ts of lending money to friends and family 🧵⬇️
🔴Don’t lend to someone you don’t trust
🔷 Ask why they need a loan
Knowing the purpose behind the loan helps you set better repayment terms. In fact, it also makes it easier for you to refuse the loan, should you find it risky.
🔷 Ask why they need a loan
Knowing the purpose behind the loan helps you set better repayment terms. In fact, it also makes it easier for you to refuse the loan, should you find it risky.
🔷Assess your financial situation
➡️Secondly, assess your own financial situation. Make sure that you have adequate savings to help them out and do not end up cutting down your living expenses or investments.
➡️Secondly, assess your own financial situation. Make sure that you have adequate savings to help them out and do not end up cutting down your living expenses or investments.
🔷Involve your spouse in decision-making
➡️Ensure that your spouse is on board with your decision to lend money to relatives or friends. Because it doesn’t just cause a strain on your cash reserves, but can also affect the future goals of your family.
➡️Ensure that your spouse is on board with your decision to lend money to relatives or friends. Because it doesn’t just cause a strain on your cash reserves, but can also affect the future goals of your family.
🔴Don’t lend more than what you can afford to lose.
🔷Set clear terms
➡️Talking about money can get awkward but it’s better than the resentment you may feel afterward. Ensure the loan is not mistaken for a gift.
🔷Set clear terms
➡️Talking about money can get awkward but it’s better than the resentment you may feel afterward. Ensure the loan is not mistaken for a gift.
➡️You and the borrower must be on the same page regarding the repayment schedule, interest rate, and any other terms. Make a promissory note or a loan agreement to avoid misunderstandings later on.
🔷 Learn to say no
➡️If you don’t feel comfortable lending money to a friend or family member, don’t be afraid to say no. It’s better to be upfront about your concerns than to risk damaging the relationship by lending money you can’t afford to lose.
➡️If you don’t feel comfortable lending money to a friend or family member, don’t be afraid to say no. It’s better to be upfront about your concerns than to risk damaging the relationship by lending money you can’t afford to lose.
🔷Consider alternatives
➡️Before making the lending decision, ask if there are any other ways you can help them.
E.g., If the borrower is dealing with job loss, you can help them find a job or connect them with people who can help.
➡️Before making the lending decision, ask if there are any other ways you can help them.
E.g., If the borrower is dealing with job loss, you can help them find a job or connect them with people who can help.
➡️Another common scenario is relatives asking you to co-sign a loan. You might be asked to become a loan guarantor instead of giving a direct loan.
➡️This can help them get approved for a loan they may not have been able to get on their own.
➡️This can help them get approved for a loan they may not have been able to get on their own.
➡️While it may seem easier than giving a direct loan, remember that it can have worse consequences. Co-signing a loan works out only if you can trust the borrower’s ability to repay the loan.
➡️If the borrower defaults on the loan, you will be responsible for repaying it, which can negatively impact your credit score and financial stability. This can result in financial strain and even legal action.
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