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Expired · 4 Views
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You should not lend money to friends and family
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Lucy.Anderson followed this discussion
One of the most awkward things I have ever had to do was to ask a relative for money. I was about to graduate college, broke but debt free, and I desperately needed a car. So I asked my aunt to give me a loan. Yes, it was awkward, and to my surprise, she refused. While I know it was awkward for her too, she refused the loan in a way that made me feel like it was nothing personal. She knew why you should never lend money to friends or family. Instead of simply rejecting my request and leaving me to find an alternative solution on my own, she helped me find a way to afford a car.
Have you ever been in a position where you needed to refuse a loan request from a friend or a relative? How did you handle the situation?
celia-rodriguez followed this discussion
I have lent money to friends and family members and borrowed money from family members and friends, and neither situation worked out very well. I learned a lot from both experiences. Most importantly, I learned that I’ll never loan money to friend or family member again!
Loans to family and friends tend to be open-ended. The parties don’t reach an agreement for a timeline for repayments, and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans.
This leaves both parties in limbo, and doesn’t set any expectations. The uncertainty can lead to stress as the borrower may worry that the lender expects payment and the lender worries about when he or she will be repaid. When I loaned money to a family member, it delayed my decision to buy a house.
Reply to Tyron
Loans to family and friends tend to be open-ended. The parties don’t reach an agreement for a timeline for repayments, and don’t include interest on the loan. Lenders don’t know when their money will be returned, and borrowers don’t know when to repay the loans.
This leaves both parties in limbo, and doesn’t set any expectations. The uncertainty can lead to stress as the borrower may worry that the lender expects payment and the lender worries about when he or she will be repaid. When I loaned money to a family member, it delayed my decision to buy a house.
If you must lend money to a family member or friend, provide them with a timeline and a schedule for repaying the loan. The timeline provides a final deadline for total repayment of the loan and the schedule provides them with guidelines for making monthly payments.
I have loaned money to a family member, and I have also borrowed money from a family member. In both scenarios, family get-together were very awkward. I felt uncomfortable being around the person who loaned me money. It was also uncomfortable to be around other family members who knew about the loans.
No one wants to talk about the loan or about money or even about anything that costs money, because then people might wonder why someone hasn’t repaid the loan.
It can be difficult to request repayment of a loan from a friend or family member. More than likely, the lender cares about the borrower, and doesn’t want the borrower to feel awkward.
The lender may continue to worry about loan repayment, and thus shut down some or all communications with the borrower in order to avoid talking about the loan. The borrower becomes confused and hurt feelings can result.
My excuse is always the same every time - “That’s not in my budget. Sorry.”
The most important thing is to formulate a policy now. Then you won’t have to think on your feet when the situation arises. Maybe you only lend in dire emergencies, or to relatives with jobs. Or perhaps you decide not to lend to anyone under any circumstances.
If your cousin or your friend needs help on a regular basis, those cash infusions address the symptom rather than the disease. Whether it’s careless spending or a lifestyle that’s too big for its britches, the underlying issue needs to be fixed, not enabled. STAY FAR AWAY FROM SUCH PEOPLE!!
If you do decide to lend, get it in writing
My stance on the matter is unchanging - you shouldn’t lend money you aren’t willing to lose. Promissory paperwork notwithstanding, are you really prepared to take a sibling or a friend to court?
I lent money and credit cards to a parent and a sibling when I was young......and foolish. They got angry when I asked for repayment. We shared a mailbox. I never saw the bills until they were sent registered with threats of court action. Just don't do it. No one loves a bill collector. Lucky if the money is all you will lose.
If you decide to, just consider it a gift. And never ask for repayment.
Don't, Don't and Don't. There are your 3 rules!!!
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