"Notary. or you question your own hesitation ("I must be a bad person or I wouldn’t feel conflicted"), then turn her down, says Levine.If you do cough up the cash when you aren't sure you want to, you risk feeling resentful, and that can cripple the relationship before it's even time for her to repay you. None of us would have got through our swinging 20's otherwise! Insist on a promissory note too! "It has helped me to know that a loan must be documented, and if there was no documentation, there is no way to So what is stopping you from applying the same prudence here, too?Have a lending agreement prepared by your lawyer. Unfortunately, at one point or another, a friend may approach you for a loan, and you will be forced to make the difficult call of whether or not to give it to them. "It has helped me to know that a loan must be documented, and if there was no documentation, there is no way to Depending on the amount, loaning money can involve complicated tax rules; failing to charge interest might get you in trouble. “So if you miss a payment, this is the piece of paper that we'll look at that'll help us to decide what to do, so it moves the friendship out of the way,” adds Ellis.When registered nurse Lisa Schloeder, 49, decided to help a colleague enroll in a nursing assistant program, she wanted the $1,500 loan agreement on paper. I wouldn't be upset, but now I’m considering some investments and that money would help.”White’s mistake was thinking she and her sister were on the same page when it came to repayment—a situation that could have been avoided if she had a thought-out plan.It might seem too businesslike, but "set specific terms for the loan that everybody can agree to," says Ellis. While there may be perfectly good reasons for a lack of credit, a low credit score is an indication that they haven’t made good on their promises of repayment in the past.All tip submissions are carefully reviewed before being publishedIn general, it is a bad idea to lend money to friends. The money lent should always been in the form of a cheque. Please ensure that the same is completed and duly signed manually by both of you. Of course, all is not lost if you do agree to lend someone money. You should think about whether you would consider their situation to be a real emergency. So ensure your friend does so. Copyright © 2016-2017 Limor Markman Consulting Inc. All Rights Reserved. First of all, lending money to someone is a financial risk. If the friend does not pay the money back, you have lost a friend and money. This article was co-authored by our trained team of editors and researchers who validated it for accuracy and comprehensiveness. But more complex deals—for example, if they involve collateral or involve more than $10,000—may require a lawyer to be involved.Ideally, a loan agreement should be dated and state the loan amount, due date for paying it back in full, the payment schedule and any agreed-upon late payment fee (see Rule 5) or interest. “There was a check waiting for me every two weeks as we had agreed, and I felt great seeing what an amazing nursing assistant she became for our practice,” she says.You can draft a simple personal loan agreement without hiring an attorney, Prakash says. Website Created by If you decide to give them the loan they need then it is important to document the transaction in order to make it legally enforceable, and don’t be afraid to remind them about the money they owe you. Of course most times, you’ll really want to help but you have to realize that lending them money isn’t necessarily going to be the answer to their financial troubles. Therefore, you should think carefully about whether to lend them the money, especially if it is a larger loan. In this instance, you may want to let them know in a voicemail or email that if you can’t get in touch with them by a certain date, you will be forced to take legal action. Set limits and parameters, and incorporate those relevant clauses in your legal literature.Incorporate the payment schedules, which are essentially timelines that describe when payments will be made, and whether those payments go to interest, principal or both as an annexure. In fact in some instances it can actually make things worse.Almost there… You’ll receive a copy of my E-Book, The Game Changing Financially Fabulous Strategies That No One Ever Told You, in your inbox shortly! This will reiterate the fact that he has an obligation to you and is not a joy ride at your expense.A smart approach is to create a joint savings account. By taking the right precautions, you can avoid any hurt feelings or bank accounts since you’ll set both yourself and the borrower up for success. … Say they are insisting and ensure all this happens before you release the money. But as long as you and your money stay protected, lending to someone you love is doable – even if it isn’t necessarily advisable. Principal free? Borrowing Loans Money Personal Finance. You may va… Hmm… this is a tough question. Please don't draw up a document for a paltry sum! Bring a matter to court if not paid. Getting hit up for a loan can make you feel like you're stepping into a minefield.In today's economy, it's easy to understand how someone can find themselves in a dark place financially.
Why loaning money to family or friends is a bad idea. If you really can’t stand to see another ad again, then please We use cookies to make wikiHow great. Supplement it further by cutting the cheque for whatever it is directly, so you have better control of situation. Proceed, but with the action plan enumerated below:No one likes to be Scrooge. Make sure your pal hasn't promised the same to someone else!Simple: S/ he has something of yours, you have something of his/ hers!Sometimes, when we are clouded with financial pressure, we are not able to look at other possibilities objectively. "If the borrower still doesn't pay, you can take them to court,” says Prakash.In the scenario where one lump-sum payment is being paid back after a long-term loan, it never hurts to send a reminder email a month in advance of the due date to show her that you’re sticking firm to the terms.