Last time I wrote an article for the Inquirer.net about some practical tips to consider when someone is borrowing money from friends and family members. Of course, that article is obviously written for the borrower, not for the lender. But today I’m going to talk about some practical rules in lending money.
While lending money can be a great opportunity to help, any discussion about money can be uncomfortable, especially if it involves people that are close to you. One common reason is that money issues can ruin one’s reputation, especially when a borrower is not able to repay his outstanding debt.
If you are thinking to let your friends borrow money from you, are there some practical guidelines you might want to consider to meet your expectations? Yes. Let me share with you the six practical tips before you put your own financial well-being on the line for your friends and family members.
1. Lending money is an opportunity to help
Initially, the reason why a borrower is coming to you is that he is in need financially. Perhaps he will need the amount for emergency cases such as paying the hospital bills, emergency repair, accidents, etc. In this situation, you’re thinking of lending money as an opportunity to help people. Apparently, your friend wouldn’t come to see you as an option if he thinks you have no financial means to lend him.
2. Check your own financial condition
Before you make a decision to extend credit, assess if your income is enough so you will not worry about cutting down your own expenses. It’s great to help but many times we suffered financially because we failed to check our own financial condition. In other words, you must ensure if such decision could affect your own financial health. While it may be difficult to refuse lending to a loved one, learn to say no when needed. Also, lend money that you can only afford to lose.
3.Assess if the intention is legitimate
There is nothing wrong with helping a friend as long as his intention of borrowing money is legitimate like his son is in the hospital and needs medications or surgery. However, borrowing money becomes a different story if it involves becoming addicted to the casino, planning to purchase a sale at the mall, or taking a vacation. If the intention is legitimate, do not forget to discuss the time frame and the process of repayments to avoid future problems.
4. Don’t be shy to ask for repayments
Sadly, most borrowers are not responsible enough to repay their debts as they tend to forget their promises even after a few weeks. Therefore, it’s important to remind your friend or family member about his financial obligations even though it may be just a small amount of money. Remember, you just lend your money because of emergency situations. The longer you refused to address the issue the more it can make you feel resentful and bitter.
5. Be more considerate for unfulfilled promises
A good relationship that is built on mutual trust will always find ways to be more responsible with his financial obligations. However, not all agreements and promises are being fulfilled, so you need to be more considerate and realistic about the interest rate when lending money. If the reasons or excuses are legitimate, consider giving a grace period to repay you. If for some reasons he cannot repay you, be mentally prepared that the money may not come back to you and consider this as a learning experience.
6. Never allow debt to ruin the relationship
Having a healthy relationship is more important than money. Unfortunately, because of outstanding debt, your patience is being tested and the relationship could be at stake. Therefore, you need to be more careful as you have set a dialogue on how he would be able to fulfill his financial obligation. Never allow debt to ruin any healthy relationship.
Seeing friends and family members in financial trouble can be distressing. However, money sometimes isn’t the only option. Think about other ways of assisting them such as helping them find another job or referring to a part-time job where they could earn extra money. Most importantly, you could offer a prayer and remind them to trust the Provider.
For the LORD your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you. —Deuteronomy 15:6, NIV
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