Should You Lend To Your Friends & Family?
When we see our friends and family struggling with something, our first instinct is to assist them. Although, this isn’t always the case with financial situations. Many people become more hesitant when dealing with their money, despite how close they may be to the person needing help. Financially assisting those around you while struggling with your finances yourself can often cause a great deal of stress and pressure on individuals. Therefore, it’s best to be avoided and left to the professional lenders and brokers, just like us here at BingoLoans. However, for those on the other end of the line debating whether or not you should try lending to your friends and family, here are some points to consider.
Aspects To Cover Before Lending
Offering those around you your financial help can help them massively, but it might not always go the way you imagined. There are always aspects that people don’t consider, leading them to issues further into the lending process. Never mind how important they may be to you on a personal level, controlling financial values is not everybody’s strongest point. Therefore, you run the risk of losing your money as well as a potential relationship. So, before you make your final decision, here are some things you should think about.
Can you definitely afford to help?
As much as we all want to support those around us, not everybody is financially stable enough to do so. In fact, most households actually carry some sort of debt with them. So, you could potentially be pushing yourself into more debt in order to help those around you. However, that is a choice that you have to make in regards to your personal finances and your disposable income.
How reliable is the borrower?
If you know somebody has a poor relationship with their finances and they cannot manage their own correctly, are they reliable enough to lend too? You would always imagine your friends and family would pay you back as soon as they possibly could. However, as we already mentioned, this is not always the case. Therefore, it is important to test somebodies reliability before lending.
What does the borrower need the money for?
There are hundreds of reasons a person may want to borrow from a family member or a friend, but asking what might be your best option. Typically, the main reason for having to borrow a payday loan or short term loan is a matter of urgency. If an emergency has appeared and somebody is unable to support themselves, a loan may be considered. So, it is worth asking why they need money to borrow in order to keep control of the situation and ensure they are borrowing for the right reasons.
What To Think About If You Agree To Lend
In order to ensure you are working towards a smooth journey, here are some things you should review before lending.
How will they repay you?
Considering your repayment plan should be at the top of your list when it comes to lending your finances. Ensuring the safety of your own money to prevent it from getting lost or stolen is very important. Usually, the lender and the borrower would work out a weekly or monthly repayment plan to last a set number of months. This plan should also include amounts, dates, and even what will happen if a payment is missed. When confirming this information, you need to guarantee that both parties confidently understand the terms and conditions. Some people may choose to confirm the deal in writing before any transactions are made.
Will you charge any interest?
The majority of the time, when people are lending money to those they are somewhat related to, they often do not charge any interest. However, this is a personal decision to be made before any agreements have been finalised. It is possible that you will charge interest to the borrower, depending on the circumstances. For example, a low-interest rate may be added for aspects where you’re trying to teach a financial lesson or even to ensure that the borrower interprets the situation in the correct way.
Keeping on track and up to date with all of your finances will allow you to understand where you’re at throughout your lending journey. Having a record to look back on and report to if necessary will help to keep your mind at ease. Your track record could include amounts owed, dates and times, and even your current financial situation.