It is not new that our friends or a family member come to us and ask if they can borrow some amount. It is now new as well that oftentimes we hear this little voice inside our mind saying "Don't do it", however, there are instances that our mouth says "Yes or OK" maybe because of "humanitarian reasons". When we say NO, it does not mean that we don't want to lend them some money, we are just afraid that they won't pay us in the future. If you are on this situation, afraid no more because I took some time and do some research so everyone of us are prepared whenever this time comes to us unexpectedly. Here what financial experts has to say when you can't say no to someone who's borrowing money from you.
From the point of view of a financial planner, one of the best things that you can do first is by making the borrowing official. You can ask your friend or family if they are willing to sign a promissory note stating the terms of the loan. This will also differentiate from being given not as a gift but as a loan. Do no forget to include the payment arrangements that can be done on a monthly or a fixed payment. It doesn't matter when will the payment starts, the reason why your doing this is for you to have a fall back in the years to come. If they agree being charged for an interest that would be fine. Now, for them to have the accountability, do not forget the option of taking them to court in the event that they did not comply to all the conditions ( of course it is up to you if you will go this far).However, if the borrower is having trouble paying the amount, you can take time and modify the terms.
Prior to giving the money to a friend or a family member asking to borrow, do not forget to look beyond the loan. Check out the borrowers spending habit. Does this person eat out more often than you do? What about the latest gadgets? This will guide you to take a judgment call. It is up to you if you will answer a YES or a NO.
Another suggestion that will secure the borrowed money is getting your spouse or any family member to serve as a witness before giving the money, if your friend can bring along his wife or any family member that would be better. Both should agree to the terms and conditions.
The last but not the least is to prepare yourself for the loan that will not get paid. Financial experts consider personal loans as highly risky. It is for the reason that before your friends or family go to you and asks for a personal loan, they already went to the traditional channels of borrowing and because they were not approve or just cannot comply with the the requirements needed, they turn to you as the last resort.
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