Lending Money to Families and Friends

Lending Money from borrowing friends and relatives is really never a good idea. The main result is usually animosity between you and the friend (or relative) simply because the borrower has defaulted on paying back the loan. Some borrowers (not all of course) tend to be complacent in paying back loans they got from relatives and friends and this is because they feel that there won’t be any legal repercussion if they fail to do so. The friend or relative who lent the money on the other hand will now feel hurt and angry and these emotions between the two parties will cause a total breakup of the relationship so it is never really wise to lend money to friends or relatives. The only way to avoid all of this is to just give him the money if you can afford it.


Offer to Co-sign a Loan


Instead of extending credit to friends and relative, the better option is to offer to co-sign a loan with your borrower friend. However, you should only offer this to families and friends who you know very well and who you know would live up to the responsibilities of paying back the personal loan on time. Otherwise, you might just end up paying for the loan yourself. In most cases, the only solution of subtly turning down a loan from a friend is to simply say “sorry but it’s my policy never to lend money to friends and relatives”.


What Help can you Offer?


There are other ways by which you can help out a friend or relative who is in a financial bind. First you can help out by discussing other options in tackling the financial problem and if there is no other recourse except to shell out some cash, it is best to give an amount that you can afford to lose. In the event that you would have to shell out a sizable amount make it a formal loan and make an agreement with an explicit repayment terms. Immediately emphasize that even as a friend, there will be legal complications in the event that he defaults on the loan.