Before you lend money to friends or family…

There is a very famous old saying that says “if you lend money to a friend, you lose the money and the friend”. And they do not necessarily have to be high sums of money. Sometimes, a simple and small amount of money with its subsequent difficulty to return it, generates a discomfort in a certain way, and not necessarily on the part of the “borrower”.



  1. Do not be afraid to say NO

You have absolutely no obligation to give your money to someone, and more being a hard earned money or saved on sacrifices. Often, you are making a dangerous investment of high risk and zero reward.

Follow your intuition, and if you do not feel comfortable lending the money to that particular person, just say NO. If your refusal to lend the friend money causes a problem, keep in mind that the most likely thing is that you would end up like this, even without you lending the money. Analyze very well who you are thinking of helping.



  1. Do not give in to emotional blackmail

People who need money will sometimes expose you to a situation much worse than they actually have, with tears included. When you see a person with that level of drama, think that when you get to that situation, it is more likely that your situation will get worse, and not better, so the probability of your money back in the short-medium the term will be quite low.



  1. Do not use your own savings

Provide only an amount that you can afford to lose in case the money is not returned, as there is a likelihood that it will be.

If you have a savings or investment product, do not take the money out of there, nor use the money destined for your emergency fund , because that money is precisely for that: for emergencies (yours).



  1. If you lend the money, do not throw anything in the face

If the money goes accompanied by a lecture in which you are going to criticize the financial abilities of that person or the bad man of business that is, the bad head that that person has, etc. … do not lend it, because that person will take the money, but he will not be really grateful to you, but humiliated by you.

And if one day you return the money, you’re feeling about you will be recorded in your head. Of course you can give advice in a courteous manner.



  1. Write a contract

Most people forget that the fact of lending money is almost never merely friendship, but a financial transaction with nefarious compliance statistics. Therefore, try to do it professionally.

Do it in a friendly way, but with a written contract: we are going to do a paper where you have given us “so-and-so” $1,000, and that you agree to return it on the agreed date. Have it in writing and that each one has a copy, at least remember that one owes money and the other owes money.

And if the thing is distorted, at least you have a document that would serve you in a legal proceeding. However, if it serves you as a reverse motivation, if that person loses his job and runs out of income, no judge will garnish anything to pay you.

That person should only tell the judge that he recognizes the debt and that he intends to repay it, but now he cannot.



  1. Put yourself in the worst possible scenario

In most cases, when we lend money to friends or family, not everything always ends as we had planned, so you should ask yourself some questions:

Will I be able to pass without being affected if I am not returned that money?

What conflicts would it bring me if they do not pay me the money?

Apart from the money, what else would I lose if I stopped seeing that person when I was uncomfortable for owing me money? And sometimes, not only do we lose our friend, but everything that accompanies that friend.



  1. Have insurance

This part may sound harsh, but if it is a friend we want to help, but something tells us that we cannot trust him too much, sometimes, some people lend the money condition to do a pre-contract where that person puts something in our name (a car, a motorbike …)

It may seem an extortionary behavior, but it is a way of having the right, but not the obligation, that, in case that person does not comply and makes us lose our money, at least we can recover all or part of the money with another active.

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