Personal Loans from Family - Lending to a Relative

LENDING MONEY TO A FAMILY MEMBER

Do you have emergency funds put away in the event of an emergency? A recent study by Fidelity Investments found that over 40% of US families do not have any sort of emergency reserves.

The obvious first choice for borrowing during times of needs, like a loan while unemployed, is from family and friends. You should also explore person-to-person lending.

So if Cousin Joe asks to borrow money from you at the next family gathering, you need to be prepared by asking yourself the following:

- Do you even have the money to lend? Number one rule of thumb, don't lend what you do not have and say no.

**IMPORTANT - When lending money to a family member or a friend, it is important that you execute a promissory note between the two of you.

- What is the intent of the money? Are you lending money so that your cousin can put food on his table? Or, does he want to borrow money to use for a vacation?

- What is the likelihood that you will be repaid? Analyze the person's past behavior. If they have a history of borrowing from family, and never paying back, they will likely do the same to you.

- Would lending the money cause turmoil in your family? This is often the case when siblings borrow from parents. The child that does not get the loan assumes that their parents are playing favorites. Or, if you have a an alcoholic or drug addict relative that asks for money, your may be enabling their addiction which will make your family upset..

- How much is lending going to cost you? Suppose your nest egg yields 7% annually. So, if you lend $20,000 to someone for five years, the actual cost is $28,052. However, you may consider this a worthy investment if the money enables your nephew to finish law school or help your father finish building his dream home.

- Are there any other borrowing options for your relative? Your kids may be comfortable with coming to you because you do not charge them interest. You need to break that mold. Have them apply for a personal loan with us. Not only do we offer a variety of student loans, we help people with no credit get the cash they need while building credit. But, if it turns out they can not get approved for an unsecured loan because of bad credit, you need to find out why their credit is damaged.

- Will you be able to get by without the money you are lending? Even if you are taking from your savings, will you be protected financially in the event that you have your own emergency to deal with?

If you don't have money to lend, consider being a personal loan co-signer.

Family Loans
Borrowing from Family
10 Reasons Not to Lend to Friends
Loans Among Family Members
Helping Without Giving Money/Loans
Seven Safe Ways to Loan Money to Your Family
Paying Taxes On Personal Loan Interest You Receive When Lending Money to Friends or Family

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