They say money and friends don’t mix, and there’s certainly some truth to that. However, life isn’t always black and white. One day you might find yourself in a situation where you are pondering lending money to a loved one. If that happens, consider the following before going through with the transaction.
If a loved one asks for money, tell them you need time to think about it. You don’t want to lend money under pressure. Telling them you need time gives you the opportunity to either come up with reasons why you’ll do it, or vice versa.
During this “thinking time,” one of the first things you should do is look at your budget. Can you afford to lend this money? What if they never pay you back? Consider all possible outcomes to lending the cash and how those will impact your budget.
Don’t be afraid to say no to the loved one. If lending the money will put you in financial hardship, it’s just not worth it. The loved one might be put off at first, but simply explain why you can’t lend them the money. If they are truly a person who is close to you, they’ll understand.
If you decide to go through with the loan, get everything in writing. As US News suggests, the document should include the date and amount of the loan, payment dates, and any interest rate. Yes, getting your loan in writing might be a bit awkward. But this brief awkwardness will be worth it in the long run. If the details of the transaction are clearly documented, there’s little chance for things to go awry.
This article was originally published on SavvyMoney.com