The fact is that most people who lend money to family and friends end up regretting it because they never see the money again. There are numerous considerations to make when you are thinking about giving someone in your life a loan of any size. It is especially important to consider these things if you are going to be loaning someone a large amount of money.
Don’t expect to get your money back
The very first thing you have to do is to prepare yourself for not getting the money back. While it’s true that the person you loan money to may pay you back without any issues, you do not want to count on that. You never want to give out more money than you can really afford to, which is precisely why you should just assume that the money you loan out is gone forever.
You probably won’t be paid back quickly
Most people who borrow money from family and friends tend to repay their debt slowly if at all. You certainly don’t want to lend someone money with the full expectation that you are going to be paid back in a few days or even a few weeks. Depending on the size of the loan you give out, it may be years before you are paid back in full.
Remind the person that they still owe you money
It can be a little awkward to keep reminding the people that you lend money to that they still owe you after a lot of time passes, but it’s something you’ll probably need to do if you want to get your money back. You don’t have to remind the person of their debt every single day, but a friendly reminder once in a while could go a long way.
Loan amount vs. the person’s income
When you are trying to decide whether or not to give someone a loan, you may want to ask them how much they make with each paycheck so you can determine whether or not they will be able to pay you back in a reasonable amount of time. If a friend or family member wants to borrow $3,000 but they only make a few hundred with each paycheck, you might want to rethink giving them the money. The amount of money the person makes will directly affect their ability to pay you back in a timely manner.
Be specific about the terms of the loan
It is incredibly important that you are very specific when it comes to the terms of the loan you give your friend or family member; it is not enough to simply say “pay me back as soon as you can.” Instead you will need to specify a certain date that the person must pay you back by. This might increase your chances of getting your money back, but you still shouldn’t count on it.
In matters of personal family lending, you will need to be smart about how you go about everything. It is perfectly fine to lend someone you know money because they really need it, but you still want to take the time to consider whether or not it’s a good decision. You should be able to say no to someone who asks you for money, but you should think it over regardless.