Lending Money to Friends & Family

If we lived our lives by the words of Shakespeare "Neither a lender or a borrower be" the world would not go 'round.

Now, from time to time we have all been asked by friends and family to lend them money or we have had to ask our families to borrow money. There is no hard or fast rule about lending money but to keep these relationships healthy long-term here are a few things to consider:

1. Write up a contract

It can be on a napkin, preferably email it and ensure that the recipient has read is and is fully aware of the terms. The contract should state the amount of the loan, the interest, how & when it should be paid back . This ensures that all parties are in agreement prior to the money exchanging hands. Once money has exchanged hands without a contract then it is very hard to put terms against it. If this is the only thing that you do then you are way ahead of the game.

2. Ensure you can afford to loan the money

If you cannot live without this money for 1 year then don't lend it - PERIOD.

3. Don't lend if you don't have

Simply put if you don't have it - don't lend it. Don't take out a loan for anyone outside of your spouse - you will be held liable if that loan is ever defaulted.

And lastly, if you feel uncomfortable about lending then just express to anyone who asks, given the recent climate of the economy you are not in a position to lend anyone money....most people will understand.

As always, we are here to help. Email us or visit us as centssavvy.com