Extending financial assistance to family and friends can be stressful, but if they need the money badly then it becomes something that you have to deal with. You may feel obligated to lend a hand during these times but it often puts you in an unfavorable situation. If you want to avoid this from happening, you may want to consider these thoughts:
Things to Remember When Lending Money to Family and Friends
- Keep a clear mind when lending
Be sensible when lending and don’t let emotions cloud your decision. It is okay to feel bad about the situation they’re in but you should remain sensible. After all these are your hard earned dollars.
- Seek others’ opinion
If you believe lending them a certain amount is the right decision, feel free to do so. If you are doubtful about the intention of the borrower, might as well follow your intuition. You might save yourself from unnecessary trouble and also teach the borrower a very good lesson. Seeking a second opinion on whether or not to lend money is beneficial in this situation. A friend can offer new insights and ideas that are not influenced by their feelings since they are not closely related to the borrower.
- Help solve the problem without having to lend
It is perfectly okay to say no especially if there’s a probability of a negative outcome from letting them borrow from you. You might as well help find other ways to resolve the problem. Be clear to the borrower that lending them what they need may not be the best option but you are willing to help find other solutions. You can make suggestions and ask them if they find those a likely solution to their financial crisis.
- Be flexible with their situation
In some situations the funds can be repaid in another form. Understandably your relative or friend may be lacking in funds so they cannot pay you back outright, be prepared to negotiate. You may want to receive anything that is of the same value as what they have borrowed and this can be an acceptable form of payment.
- Put it in writing
A contract comes in handy if you want to be assured you’ll get your money back. Although this is not something common between family and friends, it helps keep things in perspective. You can always say that it is for the purpose of recording the amount that you have lent to them. Often a contract is drawn when a large amount is involved, but never be discouraged in having them sign an agreement regardless if it is just a small amount. This helps the borrower feel a sense of responsibility since the loan is in black and white.