Every now and then, we have friends and relatives who will borrow money from us.
It’s totally normal to be in a tight spot financially, due to excess bills and what not. But we all need to put some things into consideration before lending people money. Sometimes, people take advantage of the friendship and even fail to give it back to you which is not nice. That said, here are things you need to put into consideration when loaning your friends money:
1. Know that it’s not a must.
You can say no if you’re not in a position to. You’re not obliged to break your neck for someone else when really, you cannot afford.
2. Before loaning, do ask what the purpose is for.
This can help you weigh your options, especially if they are asking for a huge lump sum. If you cannot afford, do say that you’re in a position to, albeit, be kind about how you say it. You could suggest other options to them, like a bank overdraft, bank loan or even M-shwari and other forms of loans out there.
3. Talk about the terms of payment.
It’s very important to find out when the person intends on paying you back. As earlier mentioned, some people take advantage of the friendship and even fail to pay back in the end. Which brings me to my next point.
4. Always put it down in writing.
Word of mouth is okay for close friends but to be 100% safe, always have a witness, even involve a lawyer if you have the money for it and if you’re loaning a huge amount. You could also ask for some form of collateral.
5. Keep in mind that when you loan someone money,
there’s always a possibility of not being paid back. So, loan an amount that you can afford to lose.
6. Instill tough love.
Yeah, they’re your friends or siblings but show them some tough love and make sure that they understand that you need them to pay back. You need to be tough about it, lest they take advantage of your kind nature.
7. Keep the communication open.
You definitely don’t want to loan someone money, then the next minute you try to call them, they are unavailable. Do have more than one way of reaching the person, should they delay on paying back the loan.