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Personal Loans
- The Dangers of Lending
to
Family
and
Friends |
When a relative or friend
comes to
you for a quick loan,
it can really put you
on the
spot. On one hand, you don’t want
to lose a relationship but on the
other, you can’t afford to be out
the cash, either!
Whenever someone
is hard up for money, the first place they turn is
someone they know and can trust. Although everyone
should have a 3-6 month cushion for living expenses,
most households don’t come close to that much
savings.
Before lending to
someone close to you, you should consider some things
that could affect your decision. First, do you
have the extra money to lend or would it create a
hardship for you? You don’t want the loan to bring
stress to you financially.
Second, what do
they need the money for? If their electricity is about
to be turned off that’s one thing – but if they want to
start some crazy business you know won’t succeed, that’s
another.
Some people have a
rule of thumb before lending money to friends and family
– consider it a gift, not a loan. If you think
they may not be able to repay you, then you should be
willing to forget about the money or not lend it at
all.
The last thing you
want to happen is for the relationship to go to ruins
over money. Sometimes, parents find themselves
mired in a battle between their children who don’t
appreciate one sibling borrowing a lot from mom and dad,
so keep a lid on the loans.
If you find that
lending money to this person is a feasible thing to do,
put everything in writing – including interest if
applicable. If you want to decline, blame it on
the professionals – like your accountant or tax advisor
– or just say no plain and simple!
Information contained herein is deemed accurate and correct, but
no warranty is implied or given. Please consult
a financial advisor for specific advice pertaining to
your particular situation. © 2004 Apex Personal
Loans Store. All Rights Reserved.
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