Have you ever been in a position when a good friend or even a person you talk to a few times in your life ask if they can borrow some money as they were having financial problems?

I've been in both positions where I got ask for some financial assistance and the one in need of financial assistance.

Therefore, I understand that some people go through rough patches in life that needs a little support to get back on their feet and that there are others that just have bad money habits who are unlikely to pay you back even if you lend them a penny.

I consider these 5 points before lending my money out to anyone that ask for help.

1. Create a repayment plan

Do you like to do a weekly/monthly payment or get paid back in full on a schedule date? I can see why weekly/monthly payments would be a good idea as you can keep track of this person but for me, I do prefer scheduling a date and get the full amount instead of bits and pieces.

Honestly, if I need to make any sort of contract with this person then it certainly means I don't trust this person enough to lend them any money.

But if you really want to help them out because you know that they're just going through a rough patch, by all means, have them sign some documents if that allows you to sleep better at night. There's nothing wrong with that. It's your money.

2. Make sure you have enough to lend

I like to ask myself if I'll need the amount they're asking in the next 2 or 3 months. If the answer is no, then I'll consider lending but if I do, then I tell them I just can't do it.

If you don't have extra money in your bank, don't even bother saying yes.

3. Don't expect to get it back

When lending out your money with or without a contract, there's always a possibility you may never see it again.

Be prepare of not getting any of it back, think of it as a gift more than a loan; you wouldn't resent this person as much if he/she doesn't pay you back.

If this person doesn't pay you back, learn your lesson and move on. Remember, don't lend out any money you're not willing to lose.

4. Evaluate this person

- How well do you know this person?

- Are they a close friend or just an acquaintance?

- What's the history and current situation of this person?

- Why do they need to borrow money?

-Have they ever helped you financially?

These are some of the question I would ask myself. Get to really know this person because it's your money you're risking to lose. This leads to my next point.

5. Learn to say 'no'

I've been on both sides of the table where the person didn't paid back in full and thought it was okay to not do so but I've also been on the other side where I got paid back in full when I asked for it.

I've came into conclusion that I'll only give a loan to friends that I truly, truly trust and that's only a handful of people in my life. For others, I simply say no.

 

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Published by Duy Dang