During tough economic times, individuals turn to members of their own family for financial assistance. In some cases, this is wise for the borrower but, not for the lender. A borrower usually thinks that they have a better chance of getting the loan at a lower interest rate, or no rate at all. Whenever I think about a family member borrowing money, I always remember uncle Eddie in the movie “Vacation.” No job, no security, a poor use of the money, no time table to pay back the amount. The lender goes through a different set of feelings. The first is guilt. “Blood is thicker than water.” You feel bad for the individual because you realize that they are going through a tough time or they would not ask. If you decide not to help, other family members call you up and wonder why. You are actually in a no win position.
When you are placed in this no win situation, step back and clear your head. Always ask them questions like why, how, and especially when. When can I expect to be repaid? Always try to keep the ball in their court as the saying goes. This is not the time to make a decision based on your feelings. That is why it is important to step back and take a deep breath and think. Are you really helping this person out? Is there an alternative solution? Are you enabling this person farther? Are you hurting yourself financially?
The last thing to consider is what will people think if you don’t help? My philosophy is who cares what they think. It isn’t their money. You are not the bad guy. You just happen to be the one that they approached for one reason or another.
Many times just helping someone out only makes matters worst. There are individuals that would rather just give the borrower a one time gift and claim it on their income taxes. This way they avoid a constant family conflict of repayment. You can also recommend to go låna pengar trots skulder hos kronofogden. In this way, they can easily build credit history and at the same time, you are able to help them.
However, if you decide to loan a family member money, you need to have a clear understanding of interest involved if any and a definite repayment plan. You may even want to write this down on paper with signatures. Sometimes it is good to have an impartial witness to this loaning process. This helps to enforce the idea of repayment necessity to the borrower. This needs to be done so that the borrower knows the gravity of the situation. To not do so, will only encourage them to ask for another loan again.
You love your parents and you are to honor them. However, you are not to be indebted to them or they to you. Many children will eagerly help out parents before other family members. Most parents hate to borrow from their children. Only in extreme times of hardship, will they ask for help. In many cases, it is better for all the children to help. That way it is less burdensome on one individual. It also unites the family as a unit.
You have the right to say no. It is your money. You have a responsibility to yourself and your family first. You don’t even have to give a reason or excuse. If a member asks why you won’t. Simply be truthful.
Family loans are a no win situation. Stress develops in both the borrower and the lender. There are no guarantees. Even if you have a written contract, there is no true way to enforce it without bad feelings.
One thing you could consider is having the borrower put something up of value for collateral. Something like a car title or something of value. As a family lender, this is a wise decision to do. It makes the borrower know that this is an important transaction. If the borrower really needs the money, they won’t mind doing this. In many cases, it will give them a conscious feeling of knowing that the loan is secured if something worst comes along.
My father always told us to never loan. Just give what you can and expect nothing in return. He stressed that this is a two way street. Our family practices that even today. If we have a nephew or niece that is hurting, we quietly help them out. Many times we don’t even tell our brothers and sisters what we did.
Family loans are very emotional and if not handled right can lead to a family disaster. Both parties need to understand this thoroughly before doing any type of loan.