Be sensible and cautious before lending money to your acquaintances


If your family and friends are facing a difficult time, it is obvious to help them out. They may be in a problem that you can cater to. If they are in a financial problem, you can help them by lending money.

It may not be a very good idea in the first place, but you can always consider helping them. When helping their friends and family, many people do not think of the consequences.

You should always analyze the outcomes and then lend money. Also, you can consider a few tips for lending money.

Many people help their friends and family if they want to start their own business. Also, they may need money if they want to buy a large asset. It may be a high-risk undertaking with little game. You have to analyze all the aspects and then go for it.

Helping your friends and family in the right way

When it comes to money lending, even your friends or family can back off. Always get it in writing from them. There are many good reasons to get a promissory note done. This note will keep things clear between you and your relatives.

Also, you can ask various questions before lending. Do not hesitate to clarify your doubts and ask questions. If you are dicey, you can take expert advice.

This expert advice will help you to consider the points that you will forget. Once you are clear with all the pros and cons, you may proceed. If your relative has to buy a car, they may be car finance. Alternatively, they can go for a home loan if they need a home. Beware before you lend money to people you are familiar with.

You can always encourage them for this option first and then your option. It is always advisable to be practical and look for all the options.

Money lending tips

If you are lending money to your loved ones, you have to be careful. Not every time, you may be having a problem. But when it happens, it can be a serious problem. Do let anybody exploit you. You can consider the following tips before lending money to familiar people.

  1. Know Your Limits

The thumb rule of lending to friends and family is never to lend more than what you can. Always know your limits, and do not go out of the way to hell. If they are unable to pay you back, you may be in bad debt.

Also, you were right out of your finances. Hence, be aware of your limits and then promise to help. Sometimes, we may become emotional and help other people. But do not be in that zone. Be realistic and practical before shelling out money.

Make sure you are fully aware of all the facts about the people you are lending money to. If there is something hidden from you, try to find out that. It is the only way to take a wise decision.

  1. Ask them the reason

While helping, do not just keep the money. Instead, ask various questions for the following purpose. This may be a bit awkward, but you have to do it. Do not let this awkwardness come in between.

Ask about their purpose for borrowing money. If it seems suspicious, you can always back off. Do not lend money if this is frivolous. It may hamper your relationship, but it is better than being under a financial crunch.

But if the reason is genuine, you can help them. For instance, you can provide emergency loans for rent if they need urgent money to pay the rent.

They should not use your money for any gambling or illegal activity. You can always back out if you do not know the exact reason. There is no rule that you have promised, so you have to give money. You have the full authority to decide to whom you will lend money.

  1. Lend in Cash

If you consider lending money through a credit card, wait and think. Cash loans are the best option for lending money.

It is accepted everywhere, and you can pay for a variety of things with cash. With a credit card, you become bound at certain places; hence always go for cash loans.

Also, the credit part can damage your reputation if you do not get money on time. A credit card is an online mode and is checked at every step. Deal in cash to be on the safer side.

  1. Clarify About Repayment

Before lending money, always clear the terms of repayment. There should be no second thoughts while repaying the money. If you want you can get the return on time.

For example, if there is no written note and there is confusion in repayment. The borrower may not repay as per your terms. Hence always clear out the aspects of repayment.

The best way is to get it done on paper. Prepare proper documents for the repayment and make it clear to both parties. This way, you are safeguarding yourself from any fraud.

  1. Charge Fair Interest

There may be a different rate of interest in the market. But since you are lending it to your friends or family, you can charge a fair rate of interest.

Do not charge less, as it may have grown if you had invested it. Hence be careful while charging the interest rate. It should not be too less, and it should not be too high.

  1. Make a Legal Bond

Do not be lenient while lending money. You can always go for a legal bond to make it official. This will elaborate on every possibility of confusion.

You may have agreed to different terms verbally, but when it’s on paper, it’s different. Your relative may think of backing out for not paying you. In that case, this legal bond will help you to recover your money.

Always make it legal and official. If you involve legal authorities, the borrower may pay you in time due to the repercussions of not paying back the money.


It is very good to help your friends and family. But be careful while lending and be practical. The situation can turn out to be anything.  Hence, be prepared for the worse and keep your documentation intact.

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