Shakespeare wrote that loaning money to a friend is a good way to lose both friend and money. So what do you do when a relative hits you up for a quick cash infusion?
CNBC Network recently reported that 41% of the households in America are living paycheck to paycheck with little to no savings.
Okay… so we’re in a down economy, and millions are being affected. Now, assume that you are fortunate enough to still have a secure, well-paying job. Long story short, you’re doing well.
Then one fateful day, you get a phone call from a friend or family member who’s in a financial bind. They’ve started a new job with no base salary. They expect to start generating real income once they manage a few sales, but their supervisors tell them that process could take 4-12 weeks. They ask you if you can help tide them over. Sound familiar?
Loaning money to a friend or family member is always tricky. Without proper paperwork, recouping the money can be very difficult. (And who wants to wind up on a courtroom drama show, trying to explain to Judge Judy why on Earth anyone would loan a friend money?)
But, assuming your desire to help outweighs any reservations you might have about spoiling a good friendship, here are a few hints for how to make sure the financial end of your decision is sound.
* Find out why it is that your friend needs the money – If it’s because they’re out of work, ask how soon they think they’ll be employed.
* Make sure you have a clear idea when you can expect the loan repaid.
* Know whether they’ll pay you back in a lump sum, or in small payments.
Here’s one last thing to consider, if you’re on the fence. Sure, a loan can ruin a relationship and you’re putting a great deal of trust in your friend or family member to pay you back. It’s a risky proposition on all fronts, but consider the potential rewards. If they pay you back, your friend will always remember that time you helped them out, and will likely be there for you when you need a helping hand.
