Tips for Lending and Borrowing Money |

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Tips for Lending and Borrowing Money

January 4th, 2013 Personal Finance

In tough economic times, you may find yourself in a situation where you need to give money to or receive money from a family member or friend. Despite your personal feelings toward each other, lending and borrowing funds is a serious transaction that shouldn't be handled lightly. To avoid ruining any relationships, here are some important tips to use next time you're thinking about getting involved in a loan.

Lending money
1. Consider the possibility that you may not get back everything you gave. Only give as much money as you're willing to lose.

2. Think about why you're lending the money. If you feel sorry for the recipient or want to have an edge over someone, your motivations may ruin things in the future.

3. Don't be afraid to deny someone, even if you can afford it. Sometimes money just complicates things. Instead of offering cash, say you'll be glad to help in other ways.

4. Don't ever risk your own savings by trying to help someone out.

5. Talk the decision over with your spouse or partner, as his or her opinion matters.

Borrowing money
1. Tell the person you're asking exactly what you plan to do with the money. Develop a budget and a payment plan that includes your goals.

2. Figure out beforehand whether the loan is actually going to help you or create further issues. Evaluate your own financial problems and discover solutions to help you save in the future.

3. Be clear about whether or not the loan is going to impact your taxes. The National Foundation for Credit Counseling recommends checking with an accountant before asking for sums more than $10,000.

4. Write everything down and have everyone sign the document, just in case.

5. Offer to give your lender collateral on large loans. He or she can be listed as a lien holder on a car title or as a second mortgage holder on a house. This will demonstrate that you're serious about the deal.