We all lend money to friends or family members in times of need. It is prevalent in all countries of the world.
According to a US government survey, US citizens borrow about $89 billion from friends and relatives each year. They usually take out loans to pay for university, to pay a down payment on a house, or to face a sudden emergency.
When dealing with close people, there are many misunderstandings after taking a loan. In many cases the relationship is also broken. However, this complication can be avoided if you pay attention to a few things before giving loans to relatives or friends.
1. What Is He Like As A Person?
Before giving a loan to someone, you need to know the details about him. How well do you know him? Has he borrowed from you before? Does he have extravagant spending habits? If he lends once, will he ask for a loan again?
Consider the answers to the questions. In short, think carefully about whether the person can be trusted.
2. What can be the purpose of seeking loan?
Second, find out why he is borrowing. Think about whether the reason for borrowing is in line with your ideology. If you can think like this, you can easily make a decision about giving a loan.
Many people are willing to give loans for needs such as paying for the education of someone they know or helping with a business. Many people are more interested in giving loans for household expenses or to buy things for the house. Basically, whether you are comfortable with the loan is the most important thing.
3. be careful
Before lending money to someone you know, you should be careful about a few things. Keep in mind whether the person you are lending to has tried to take a loan from the bank. If the bank doesn’t give him a loan, try to find out why. Again, many often take loans from relatives, but do not repay them on time. Be careful before lending money to those who have such habits. Also, if the borrower wants to invest the money in a business, then try to know about the future of that business.
4. Enter The Complete Details Of The Transaction
Verbal agreements can often be risky when it comes to lending. Because, if the agreement is made verbally, there is an opportunity to establish different meanings of the agreement. Therefore, if the terms and conditions of the transaction are not written down, it is natural that there will be disagreements about when and how to repay the loan money in the future. In this case it is best to write the agreement on legal paper or stamp paper. If that is not possible, then the type of transaction, amount and other details should be written in white paper.
5. Impose any conditions while lending
At the time of lending, you can ask under what conditions you are lending. Each person’s condition is different. May be in your case, about returning the money on time.
Decide in advance whether the borrower will repay the money in lump sum or in installments.
However, people borrow because there are problems. It may not be possible that the person will be able to return the money to you within the stipulated repayment period.
6. Consider whether you will need the money
Many times, in a hurry to give someone a loan, one does not take care of one’s own needs. So before lending someone, think about how much money you need. If you can lend money from your savings, definitely help. But if you may need the money in the future, consider the whole thing before lending. Because, if you don’t do that, you may have to take a loan at the time of need.
7. Protect Personal Relationships
The last thing that needs to be taken care of is to protect the relationship. Be careful not to ruin relationships with friends or loved ones due to money. So maintain the attitude of being there for each other in times of need. Again, get in the habit of saying ‘no’ when you can’t lend.