It can happen to any of us: One minute we’re a friend or family member; the next moment, we are a loan officer at a bank. Or at least, it can feel that way if you’re ever in that awkward position of being asked to lend money.
There are plenty of reasons you might be asked for money. Maybe inflation, which has been easing this year, has nonetheless gotten the best of someone. Maybe a family member or friend has lost their job. Or, maybe the person asking for money is simply a complete disaster when it comes to making financial decisions.
But lending money to a friend or relative can be risky. You may not get paid back, or if it takes a long time to get the money back, your relationship may crack under the pressure.
Still, despite the risks, you may be inclined to extend a family member or friend some credit anyway. If you decide to do it, here’s how:
How to Lend Money Safely
If you’re lending money to a close family member or friend, you don’t need to be concerned for your physical safety – but your financial safety is another matter.
There are several steps you’re going to want to take, including:
- Tell your friend or relative you’ll think about lending them money. Impulse shopping is bad enough; impulse lending could be really dangerous. If this is a significant loan, you owe it to yourself to determine if you can afford to lend your hard-earned cash.
- Look at your finances before making a loan. What does your cash flow look like? In other words, check your…
