Loaning money to friends and relatives is something that often comes back to haunt a lot of people, due to the fact that often the money isn’t paid back very quickly, if at all. This can then often cause problems between the two parties, because of course both think the other is at fault. Fortunately there are several easy ways to make sure that either you get paid back, or that friends and relatives won’t ask to borrow money from you all the time.
The main reason that problems seem to arise between friends or relatives lending each other money is the fact that they have different ideas about what the terms of the loan are. The person borrowing the money is usually under the impression that because they have borrowed from a friend or relative, rather than a bank, that they don’t have to pay back very quickly. Because of the fact that no interest is being added as with normal loans, the borrower is under no pressure to pay back the money as fast as they can.
By contrast the person lending the money usually thinks that because they are lending the money to someone that knows them, that they will be more obliged to pay them back quickly. Because the lending is seen as a favor to the person borrowing, this often exacerbates the problem when the borrower doesn’t pay the money back either in reasonable time, or sometimes at all. As a general rule it is better usually not to lend money to people who are unlikely to be able to pay you back any time soon, particularly if they have a history of such behavior.
When asked for money, the first thing to do is to stop and think about the situation of the person asking for it before feeling obliged to hand anything over. So for example if a relative asks you to borrow some money to tide them over for a week or two. But at the same time they don’t have any means of income and aren’t terribly responsible, then lending them the money isn’t a good idea if you want the money back ever again. If on the other hand a friend asks you to cover something because they have forgotten their wallet. But at the same time they have a good job and are generally trustworthy, then lending to them might be a safe bet.
If you are worried about not being paid back before you have actually leant someone any money, then generally it isn’t a good idea to do it. If you are still finding it hard to turn someone down however,r, then creating a legal contract is another, albeit rare option. Just the same as any bank or loan company would use, a contract eliminates the problem of someone not paying back by forcing them by law to pay what they owe.
A similar idea is to ask the person who is asking for the money to give you something of value as some form of collateral to ensure that they will want to pay you back as quickly as they can. You should also be prepared to accept this collateral as payment if the person isn’t reliable, so picking something that you would like to own is a good idea. This might be in the form of some kind of vehicle, a valuable piece of jewelry or even furniture. This way the person borrowing the money will be more inclined to pay you back, as they will want their property back as well.
It is simply a fact of life that some people are just bad with money, irresponsible and some people are just plain selfish when it comes to their behavior. The fact that you are a friend of relative to some people merely makes it easier for them to exploit you and not pay back what they owe. The irony of this often is that they know they can’t get a loan from a bank or loan company, as well as that if they were able to then they would be forced to pay it back.
In many cases when a friend or relative wants to borrow money, it is not the first time that they will have asked for money, either within the family or the group of friends. In these cases it is always possible to check whether they are reliable when it comes to paying back what they have borrowed. If other people that they have dealt with in the past tell you that they tend to put off paying you, then lending to them is best avoided.
Personally I tend to flatly turn down friends r relatives who want to borrow substantial amounts of money for any reason, despite how well I might know them. After all if getting the money back becomes a chore and something to worry about, then it isn’t worth doing. People can try to cook up whatever sob stories they want to, but at the end of the day most of us know deep down that any amount of money that we might give them won’t really help whatever problems they have.
If you have already chosen to lend a substantial amount of money to someone and they have thus far refused to pay you any of it back, then there are several options available. The first is simply to do nothing, and write the money off as a loss, which is probably the least attractive option for most people as well. On the other hand it might hake the person that you lent the money to avoid you for the foreseeable future. In which case this might be a valid option.
Secondly you can make it your business to bother the person about the money that they owe you at every opportunity that you get. This might mean leaving messages, mentioning the money in front of them with other people whenever you can etc. Eventually most people will get tired enough of this that they will just pay up, although this may damage your relationship with them.
The last and often least palatable option when trying to retrieve money from someone is to file a lawsuit against them. This is not only time consuming and potentially costly however, but will likely wreck any relationship you might have had with the person that you lent to. On the other hand a law suit will not only embarrass and expose their behavior to everyone that you know, but will eventually force them to pay you back. So there are benefits as well as potential drawbacks to the option of getting the courts involved.