The Coronavirus pandemic has left many people struggling financially, and you could be considering lending money to friends and family to help them out.
Lending money to friends and family is a kind and generous act, although it is also one that could easily backfire and can even ruin relationships.
Finding yourself in this situation, therefore, means that you need to take into consideration multiple factors in order to avoid putting any stress on your relationship. Follow our 3 top tips to save your friend without losing them!
#1 Make sure the request is genuine
The first and arguably most important thing to consider is to confirm that the request is genuine. Fraudsters look to prey on people’s generosity and this has led to an increase in scams, particularly online, that see victims hand over money to someone they believe is a friend or family member.
To avoid falling victim to fraudsters, a quick phone call or meeting your friend or family member in person is often the best way to confirm that their request is genuine.
#2 Think twice about interest and be realistic
Every relationship is different, but before you make a decision on interest, you should take into account how this will affect your relationship. Lending money to friends and family should come from a genuine want to help and charging interest could be seen as taking advantage of someone’s financial situation to make a profit.
Being realistic about when you should be repaid is important to consider before lending money. It is unlikely that you will be repaid in a short period of time, but to increase the chances of getting your money back, a good tip is to come up with an agreement that works for both parties.
Agreeing to a standing order may seem formal, but having this in place means that you can avoid any uncomfortable conversations in the future asking for repayments.
Being realistic also includes considering the possibility of not receiving any repayments, which brings us to our next point.
#3 Only loan as much as you’re willing to lose
Before you decide to lend out money to friends and family, you should consider the possibility of never getting your money back. Although they may have every intention of repaying the loan, there is no guarantee that you will be repaid.
Viewing the loan as a gift is a good way to go about lending money to friends and family. By doing so, you are fully prepared to not receive repayment.
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