Thinking about lending money to a family member or friend?
Before you do, know this: Almost 50% of people who borrow money from someone they know don’t end up paying all of that money back. Additionally, their relationship with that person often suffers, regardless of whether or not they repay the loan they took from them.
It’s good to be the type of person who lends others money when they need it most. It shows that you care about more than just yourself and want to see those around you doing well.
But if you’re going to give someone you know a cash loan, you should ask them a series of questions prior to doing it. It’ll show them that you’re serious about getting your money back—and it’ll also give you some indication of how soon you can expect to be repaid.
Check out the questions you should ask before lending money to a family member or friend below.
“How Much Money Do You Need to Borrow?”
When a family member or friend approaches you and asks you to borrow money, they might be very direct in telling you how much they need. But it’s also not uncommon for people to hem and haw when asking for a loan from someone they know since it can be an uncomfortable situation.
If your family member or friend is vague about how much money they need to borrow, come right out and ask them to give you a dollar amount. You’re going to have a tough time deciding if you should give them a loan if you don’t know how much money they need.
“What Exactly Are You Going to Use the Money for?”
Once you know how much money your family member or friend needs to borrow from you, don’t be shy about asking them what it’s going to be used for.
In some cases, they might be using it to pay off a lingering debt that is hanging over their heads. In others, they might be using it to avoid getting thrown out of their apartment.
But no matter what the reason might be, you have a right to know how your money is going to be used if you give it to a family member or friend. The last thing you want to do is give someone money that they’re going to waste on something they shouldn’t be buying in the first place.
If your family member or friend hesitates to tell you what they need money for, you should think long and hard about giving it to them. You could be doing more harm than good by giving them money in this instance.
“When Are You Going to Pay Me Back?”
When someone lends someone else money, it’s always good for both parties to know what the expectations are as far as repaying the loan that was given.
You might be under the impression that a person is going to pay you back within a few weeks. But they might be under a completely different impression and intend on paying you back within a few months.
This can cause conflict between you and the other person, especially if you see them spending money on other things and not paying you back after taking out a loan from you. It’s why it’s good to ask this question and figure out when they’re going to repay you.
“Where Are You Going to Get Money to Pay Me Back?”
If a family member or friend is borrowing money from you, it likely means that they have an income problem at the moment. Their income isn’t enough to cover some kind of cost that they’ve incurred.
With this in mind, it’s good to ask them how they plan to change this in order to generate enough income in the coming weeks, months, or years to pay you back. Ideally, you want to hear that they’re going to pick up extra hours at work or even get a second job to get their hands on enough money to pay you back.
They should have some kind of plan in place for how they’re going to bring in more income in the near future to take care of getting you your money back. If they don’t have one, that might be a sign that they’re not going to be able to pay you back what they borrowed.
“Can We Set Up a Loan Repayment Plan?”
One of the best ways to increase your chances of recovering the money that you loan to a family member or friend is by setting up a loan repayment plan. You should get them to commit to paying you back a certain amount of money every month until the loan is paid off.
This will help you both avoid any confusion over when the loan is going to be paid off down the line. You’ll know when to expect to get a portion of your money back every month when you create a loan repayment plan.
This plan will also make repaying the loan more manageable for your family member or friend. Rather than paying back hundreds or even thousands of dollars at once, they can pay back what they borrowed from you a little at a time.
Don’t Be the Person Who Lends Someone Money Without Asking These Questions
As you’ve seen, there are a number of questions that you should ask a family member or friend before lending them money. You should be satisfied with their answers before giving them a single dollar.
You should also steer clear of lending them money if you’re worried about what it could do to your relationship. Point them in the direction of a company that lends money to people who need it instead.
We would be more than happy to help your family member or friend secure a loan. It’ll help them obtain the money they need, and it’ll help you maintain your relationship with them and avoid any unnecessary drama.
Contact us today to learn more about the cash loans that we can provide to those who need them.
