Tuesday, March 31, 2009

Loaning to Loved Ones


By David Norton

When a family member, friend, or even co-worker come to you for help, it is usually in every normal person's inclination to do what they can for that individual. However, when a family member, friend or co-worker come to you asking for money, things change. Probably everyone, at some point in their life, has had an individual close to them ask them for a loan or a monetary gift in some regards. But once this matter actually becomes a realistic scenario, be prepared for things to change.

All people have differing attitudes towards money but most everyone can agree that family is more important and substantial than any amount of cash that one could run across. Even still, "family loans" are one of the major causes of conflict within a family. Many people agree that loaning to family and friends is always a bad idea, regardless of the amount or circumstance. This can create a rift or business style relationship where one party always feels obligated towards the other. Differentiating this monetary aspect to other aspects of a relationship proves to be very challenging.

Regardless of this fact, it is very difficult for some people not to get involved in such agreements with relatives. You would never want to turn away a loved one, and though it may be a last resort, the process should still be done credibly. Instead of simply making an "I.O.U.," structure the loan as if it were with a complete stranger. Put the terms of the loan in writing and include all stipulations, such as interest, duration, payments, and recourse. Doing this may be a hassle in the beginning, but may end up saving a relationship.

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