If you are planning to loan a large amount of money to a friend or family member, it is very important that you keep a few things in mind. There are many mistakes people make when lending money to loved ones, and you’ll want to avoid them all.
This tips for personal loans will help you avoid the potential nightmare of a situation.
Only give Cash
One of the most important things to remember when lending money to friends and family is to only give them cash. You should never agree to let anyone you know open a new credit card in your name. It’s also a bad idea to co-sign loans for people you know, because the last thing you want is to be stuck with hundreds or even thousands of dollars in debt. You’ll have complete control when it comes to handing out cash, and it can’t negatively affect your credit.
Don’t give more than you can afford
You will want to determine whether or not you can actually afford to lend money to a family member or friend before actually doing it. While you may be tempted to help someone close to you when they need it, you don’t want to do it at your own risk.
Get all the details
When you are lending someone money, you want to get as much information out of them as possible. Make sure you know what your loved one needs the money for and when they think they will be able to repay the loan. The more information you get, the easier it will be to make a final decision.
Consider charging interest
If you want to be sure that you get your money back, you may want to consider charging interest to the person you are lending to. You don’t have to charge outrageously high fees, but doing so will increase your chances of getting back the money you borrowed.
Make it official
Finally, you must make a written agreement with the person you are lending money to. Oral agreements are technically considered legally binding, but you don’t want to just rely on that in court if that’s the case. Make sure you write out a detailed loan agreement and have both parties put their signatures on it. This may seem unnecessary, but it is for your own protection.
It is very important that you consider all of the things mentioned above when lending money to someone you know. Whether it’s a close family member or friend, you need to do everything you can to protect yourself. There’s nothing wrong with lending money to a loved one in need, but you should still approach it with care and tact.