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The Dos and Don'ts of lending money to family or friends

mom lending money to son

You must have heard the quote, "A friend is in need, is a friend indeed." The same thing can be said about money too. What is the point in having it if you cannot lend it to your most loved ones? However, lending money to family and friends is not as simple as it seems.

There's always an emotional attachment which can make things a bit complicated.

Whether you're lending small amounts of cash or large sums, you want to make sure that everyone is on the same page and that there are no hard feelings. To help you out, we've put together a list of dos and don'ts when it comes to lending money to family and friends.


1. Make sure that it doesn't hurt your financial situation

No matter who it is, you shouldn't put yourself in a difficult financial position just to lend money. If you can afford it without putting a strain on your finances, then go ahead. But if not, then it's best to politely decline or offer an alternative solution. You have your bills to pay so make sure that you're not putting yourself in a bad situation.

2. Lend your money to the person you trust the most

When it comes to lending money, you want to make sure that it's going to someone who you know will pay you back. It doesn't matter how close you are to the person, if they don't have a good track record with money, then it's best not to lend them any. After all, you don't want to be chasing them forever for money that they owe you.

3. Get everything in writing

If you are lending a large sum of money, then it's always best to get everything in writing. This way, there is no confusion about the amount that was lent and when it needs to be repaid. Having a written agreement also makes it easier to take legal action if the person doesn't repay the money. It might seem like overkill, but it's always better to be safe than sorry.

4. Charge interest

If you are lending a large sum of money, then you might want to charge interest. This way, you will at least make some money back on the loan. Of course, you don't want to charge too much interest, or it can put a strain on the relationship. Make sure to sit down and talk to them about it before you agree to anything.

5. Ask for collateral

Again if you are lending a large sum of money, you might want to ask for collateral. This way, if the person doesn't repay the loan, you can at least get your money back. Sometimes it's good to have a little protection, especially if you don't know the person that well or they aren't trustworthy.

6. Set a repayment plan

When you lend money, it's always best to set a repayment plan. This way, both parties know when the money needs to be paid back and there are no surprises. It's also a good idea to set up a payment schedule so that the person can gradually pay off the loan. This is especially helpful if they are struggling financially.


1. Don't let your emotions get in the way

When you lend money to family or friends, it's important to keep your emotions in check. This means not lending them more than you can afford and not getting angry if they can't repay the loan on time. It's also important not to put pressure on them to repay the loan immediately. Remember, they are your family or friends so you don't want to ruin the relationship.

2. Don't hesitate to ask them to pay your money back

If you are in a situation where you need the money back, don't hesitate to ask them to pay you back. It's important to be assertive and not let them take advantage of you. If they are taking a long time to repay the loan, you can always remind them of the agreement.

3. Don't lend them more money than you can afford

No matter how close you are to the person, you should never lend them more money than you can afford. This is a surefire way to ruin your finances and the relationship. If they need more money than you can afford, then it's best to offer an alternative solution. You have put your finances ahead of the relationship and this might cause some tension.

4. Don't forget to do a background check

No matter how close they are or how long you have known them, it's always a good idea to do a background check. This means looking into their financial history and seeing if they have ever defaulted on a loan. You can also ask your mutual friends or family members if they know anything about their financial habits. This will give you a good idea of whether or not they are trustworthy.

5. Don't put too much pressure on them

Money can be a sensitive subject, so you don't want to put too much pressure on them. This means giving them time to repay the loan and not constantly asking for updates. It's also important to be understanding if they are going through a tough time financially. Remember, you are lending them money because you care about them and you don't want to make things more difficult. If they are not paying you back, ask them politely and let them know you need the money.


If you're hoping to lend money to a friend or family member, it's important to keep these dos and don'ts in mind. Always make sure to put your financial interests first and be assertive when it comes to repayment. After all, you have a family to take care of and you don't want to get stuck with their debts. Just keep communication open and stay calm throughout the process.


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