There are some traps that people walk right into in life with the best of intentions, only to be left wondering what happened in the end. We can make great choices thinking that we are doing the right thing, only to realize that there are some things that you should avoid doing. Some question whether it is a good idea to loan money to friends and even family members. This is a tough call because you want to help someone out, but more often than not, this can lead to strained family relationships and even the loss of friendships that were once very important in your life.
Some say that you should never loan money to friends. Saying never is a bit harsh, but it really is a good idea to stop dead in your tracks and really think through what you are about to do if you want to help out a friend in this manner. You really have to think about everything involved when you want to loan money to a friend. The first thing you should think about is why they need the money. Is it something they must have cash for, like an emergency, or is it something else? If it is not important, perhaps you should say no. They may be a bit hurt, but you may have just saved your friendship in the long run.
You also have to think about how much money they need when you decide if you want to loan money to a friend or not. Is this money that you could part with easily, or do you have it put away for something specific, like moving expenses down the road or even for your wedding that is to take place next year? If you could just part with the money, as if it were a gift, without too much harm, the loan may not harm you financially if unpaid. If you have that money marked for something important, do not part with it if you can not easily replace it no matter what promises are made.
Also think about the friends/family members in question when asked to loan money to them. Do you think they are responsible? Do you think they will make paying you back a priority? Do you think they make enough to comfortably pay you back without delay? These are good questions. If the answers are all yes, the idea to loan money may be a good one, but only if it is for a necessity. It can be harder to say no to family members that need help, but you really have to know the score before you part with your money. You have to protect yourself first.
If you do loan money to a friend or family member that is over a hundred dollars, you have to get a repayment schedule put down in writing, and have it witnessed if at all possible. Though you do not want to have to take them to court, it could end up that this is what you need to do. Without paperwork or a paper trail when you loan money, it is your word against theirs. They could simply say that they have no idea what you are talking about, and you could be out all that money. Not only that, the friendship will be over. Really think hard before you start loaning money out, as it can end very badly for you if you are not careful.