Should I Lend Money to Others?

There are some of us that get asked at times to lend money to other people. This is something that can be quite awkward. It is a good idea to think about whether this is something that you feel you would be comfortable with so that you can be prepared if someone asks you.

Problems with Lending Money

When you lend money there is always a risk that you will not be able to get the money back. Whether you are lending it to someone you know and are close to or someone that you know less well, there is always this risk. Therefore, it is really important that you always make sure that if you are lending money, that you lend money that you can afford to lose.

You also need to think about whether you would want interest on that money. Think about how much interest you would get if you left that money in a savings account or bought an investment with it. Then consider how much people tend to be changed by lenders. Consider whether you feel that you should get some money and whether you would want to charge the person you are lending to, or whether you would be happy to let them have the money interest free.

Think about repayments. Would you want them to repay you regularly, perhaps monthly on a specific date each time or whether you want them to just repay you when they can afford it. It could be that you are not that worried about them repaying, but if this is the case then maybe you will be better off just giving them the money, rather than them paying you back. Of course, they may want to repay you.

There can be a problem if they cannot afford to repay you and you need the money back. This would be difficult as there is not really a good solution. Even if you have an agreed repayment schedule like you would with other short term credit, if they have no money to pay you then you will have to just manage without it. Therefore, you will need to be really careful to make sure that you will be able to manage even if you do not get the repayments that you hope for.

Who Should you lend to?

It is also worth thinking hard about who to lend to. You need to think about whether you only want to lend to people that you trust and know will be able to repay you. It might be that you will only lend to people that you are close to, perhaps just your children, for example. It is a good idea to think about who you might be happy to lend money to, particularly bearing in mind that you may not get the money back. You are more likely to be happy and forgiving of people not repaying if you are close to them, perhaps if it is your children or grandchildren, for example.

It is therefore a good idea to answer a lot of these questions in your head, particularly if you think that there is a chance that you will be asked for money. If it is known that you have money and you know people that do not, then there is a greater chance that you will be asked. Therefore, if you are in this sort of situation then you will be wise to think about what you might do. It can be really hard to refuse help when children or grand children ask you and you know that they will be really stuck if you do not help them out.

Is it Good to ‘Climb the Property Ladder?’

We often hear about people ‘climbing the property ladder’ which means that they are buying more and more expensive properties. It is seen as a good thing and something that should be encouraged. However, it is well worth looking into this to find out whether it is something that you should be doing.

Advantages

There are lots of advantages of getting a ‘better’ property. If the property is bigger, then there will be more room for you and your family, perhaps for you to put up guests or to receive visitors. You may also be able to afford properties in areas which are considered to be nicer where there are friendly neighbours or it is a location close to good schools, shops, public transport etc.

There is also a financial benefit in that houses are sometimes seen as an investment. If you put more money into a house, then it might give you a better return. Of course, you will always need to live somewhere, so it is unlikely that you will see the return on the money, but your children or anyone that inherits from you may benefit. You might be happy to invest in this way so that your children or grandchildren can have some money to help them in the future. They might even be able to sell the house, once you have finished with it and use the money to buy themselves a house.

Disadvantages

If you keep moving house, you will end up paying out money for removals, solicitors, estate agents and things like this. This is money that you will not get back and so if you move a lot, it could prove to be wasted. If you buy a home that is too expensive, you might find that you will struggle to pay the mortgage and this could put your home at risk of being repossessed. So, if you feel pressure to buy a really expensive home, then you need to make sure that you are really confident that you will be able to make the mortgage repayments.

If you decide to go for a larger house with a garden then there will be more work to be done. You will have more areas to keep clean and tidy and a lot of gardening as well which will take up a lot of time. You will also have to pay to the house in good repair and with a larger property there will be more that needs doing.

If you tie a lot of money up in a home then you will not have it to spend on other things. You might be fine with this but if you want a holiday, new car or other luxury items, you might find that you do not have the money available.

As you get older and your family leaves home you may find it difficult to manage a large home. You may need to get a cleaner and gardener to help you to keep everything in order. This could be expensive and so you might need to go through the process of selling the house and moving to something smaller. This can be tricky if you have accumulated a lot of items and furniture during the time of living in larger and larger houses as you will have to get rid of some and decide what to get rid of.

So, there are advantages and disadvantages. You need to think about what you feel will be the best decision for you. Think about you own situation, what you can afford and do not feel pressure to keep moving if you are happy with where you are.