When a friend or family member asks you borrowed moneyYou need to first think about why they are asking you and not someone else. It is likely that they will envision your business making big profits, or opening a new house or car. What they don’t see is your line of credit or how small your margin actually is. Profits.
Be receiver A loan to a family member or friend may sound like a better idea than making a loan directly. However, this can end up worse if something goes wrong. As the recipient, you are legally bound fault. If the debtor doesn’t pay it or leaves town, keep all payments with a negative mark on your record and with a friendship in pieces.
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However, this hasn’t stopped many business owners from learning the hard way that family, friendship, and finance shouldn’t mix. I once knew a couple who borrowed $ 20,000 from a relative. The money was supposedly supposed to pay back a mortgage, but instead they bought iPhones and cosmetic surgery for the woman. They never paid back the loan.
Of course, not all loans to family and friends end in disaster, but the potential problem is so serious that you should think twice before saying yes. To save yourself grief, think about how you will deal with potential problems beforehand. In particular, ask yourself what would happen if your loan were not repaid. How would that affect your finances and your relationship?
Some people just choose never to give out personal loans. When asked why, they reply, “I’m sorry, but my policy is never to borrow money.”
However, if you are thinking of loaning money to a friend or family member, it is important that you keep these rules in mind. You will appreciate:
1. Discuss other options
Are there other ways you can help him? Money is not always the only solution.
2. Only borrow the amount that you can lose
You will likely never see your money again, so it is important that you never put your financial well-being at risk.
3. Make your expectations clear
Create a detailed payment plan with a calendar and deadlines. Discuss with the person you are lending to what will happen if something goes wrong or if they cannot pay on time.
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4. Write it down in writing
If it is likely to be a loan to a family member or close friend, you will likely prefer not to hire a lawyer. However, it is important that there is a legal obligation, or at least that it is guaranteed in some way.
5. Resolve problems on site
You may feel generous by not reminding yourself that your payment is 30 days late, just looking for problems. Let the debtor know that you are monitoring payments and that you are aware of the obligations.