In difficult times like these, don’t be surprised if a family member reaches out to you for financial help. If that happens, protect yourself by dealing with the situation smartly. Here are some ways to go about lending money to family.
Think About It
Resist the urge to immediately answer in the affirmative when a family member asks for a loan. No matter how much money is involved, there’s a reason the phrase “never mix money and family” exists. Telling the person you need to think about it will give you the time to properly sort through everything involved with lending someone money.
Consider Yourself First
Make sure you are financially able to lend the money to your loved one. The reality is that most loans to family members are not paid back. Keep that in mind when looking at your finances. If you can survive the hit of never getting that cash back, you might want to consider lending the money.
Get it in Writing
If you decide to go through with the loan, as tough as it might be, get everything in writing. Try to explain to your loved one that you just want to avoid a messy situation down the line. As US News suggests, make sure that the document includes the date and the amount of the loan, any interest rate and the repayment terms. The clearer everything is laid out the better. After the loan is given, leave it alone. You don’t want them to feel any shame or guilt. Allow the person to repay the money according to the agreed upon terms.