4 Rules To Observe Before Lending To Friends and Family

If care isn't taken, you might find that lending out to family or friends can make you their enemies. I have become smarter about lending out money to friends and family after having to deal with numerous family members who still owe me money. Now I have some rules I observe before I lend out money to family and friends. I would encourage others to also note the following before loaning money out;

1. Set boundaries

If you have lent money to a person once, it is easy for the borrower to conclude that you are a charitable person. The borrower might decide to keep coming back every time they are in distress so you need to make it known that you won't be bailing him/her out all the time. Meanwhile, no matter how much they ask for, only give out what you can afford to let go of it if they can't pay.

2. Say "No''

Sometimes saying "No'' is the best way to handle people who ask you to lend them money, because lending out money sometimes creates conflict between people. When the other person isn't ready to pay and you're on their neck you might become a "bad" person. So how about you go like "It's not in my budget, I'm sorry, I can't help you."

Find a way to walk out of the situation without being impolite because the borrower will keep begging. Formulate a policy now so that you will be ready with an answer when such a situation crops up.

3. Find other ways to help

If there's a reason why someone is constantly asking you for money, you need to address it, if not they'll keep coming to you for money. If it's for their child's school fees for example, advice the borrower to set up an account and begin putting money into it all the time or change their child's school to a cheaper one. Just find a way to treat the issue so they don't keep coming back to you.

4. Have an agreement

If the money is really significant, let a lawyer be in attendance so they'll know how serious you are about collecting your money back. But even with the agreement, you can't threaten to take the case to court if they refuse to pay because they are family.

And that is why you should never lend the money you aren't prepared to lose, promissory note or not, you can't take a friend or family to court and come back smiling at each other.

Finally, never lend your in-law money, if you have to, lend them only the amount you can let go of.

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