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.