Loaning Money to Relatives
Oftentimes, family will financially support each other whenever there is an emergency. However, it can be difficult to expect it to be returned promptly. This is a page about loaning money to relatives
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When you live frugally and your relatives see that you are out of debt, they may ask to borrow money. Here are some tips for a successful loan. By successful, I mean that you'll likely be repaid and your relationship will not suffer.
- Ask what the money is for. You have a right to know, and you have a right to be judgmental when it's your money. Don't loan money for something you think is unethical or would be harmful to the relative.
- Don't loan money you can't afford to lose. If the relative doesn't repay you, you certainly won't take him to court. Don't take money out of your retirement fund or your emergency savings.
- THIS IS THE BIGGIE. Put the details in a written document. State who is borrowing from whom, the date and amount of the loan, and the repayment schedule and terms. Print two copies, you each sign both,and each keep a copy. What do you do with this document? NOTHING:vyou just file and keep it. The purpose is in the creation of the document. It avoids misunderstandings about the details, and it confirms to the borrower that you do expect repayment. Many people assume that "relatives don't really expect to be repaid", especially if they're borrowing from a parent or grandparent.
- If they don't repay you, don't "dun" the relative about non-payment. Just write it off, chalk it up to experience, and don't loan to this person again. Don't hold a grudge. In other words, don't let the non-payment ruin your relationship. (Although it certainly decreases your respect for them, you can't help that.)
The only time I've had a problem with getting repayment from a loan to a relative was the one and only time I didn't create the written document.
By Charlotte Lenox from Waco, TX
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