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How to lend money to family and not regret it

Lending money to friends and family is very tempting when you hear sob stories from the ones you care about, but it’s fraught with dangers. You’re taking a financial risk when you lend money to those you love, so if you’re considering it, you’ll need to know how to lend money to family.

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Don’t expect to get the money back

You’ll need to take a business mindset but you’ll also have to take the attitude that you’ll probably never see the money again. If the loan’s goes unpaid, you’ll be risking your relationship if you consider taking them to the small claims court. Even though you’re owed the money, if your family member doesn’t pay you back you’re left with a difficult choice which is far easier to make if you’ve already got the mindset that you won’t see the money again.

Expect slow repayments

Managing your expectations is the best way of taking the stress out of the transaction. You’re probably considering the loan because your family member can’t get money from anywhere else. That tends to mean that they can’t afford to make the repayments as quickly as lenders would like. You’ll need to be patient and accept whatever delays come your way.

Make a check list

Some individuals have no credit history or they may have damaged their credit rating so badly that you’re their only alternative. If you believe that’s the reason you’re being approached for a loan, you should make a check list.

  • Has this person asked me for money in the past?
  • If so, was I paid back?
  • Was I paid back in a timely manner?
  • What is the likelihood that I will be paid back this time?
  • What are the funds to be used for?
  • Don’t skip any question as all are equally important.

Last but not least

If you’re married and you share a bank account with your partner, make sure your spouse is on board with your decision. By lending money to a family member, you’ll be putting yourself under financial strain which could have an adverse effect on your relationship.

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