Despite much awareness about the importance of saving money, many people still fail to restrain their spending habits. This is when they engage in a financial crunch and eventually start looking for loans from their friends and family members. So if a friend of yours is asking you to lend money to them, we will guide you through a few dos and don’ts of this agreement. Not to forget, having friends is one of the greatest blessings in this world, but things can turn bad if you both engage in a verbal spat or a physical fight over money.
So before you decide to lend money to your friends, make sure to read this article till the end:
The Do’s of lending money to friends
Have a Clear Discussion
When lending money to a friend of yours, make sure to let them know that it is not a gift but a loan, which has to be repaid. One of the biggest mistakes many people make is when they don’t acknowledge the reason behind asking for money. Similarly, if you don’t chant about lending them the money on the spot, your friend will receive it with a big smile, not willing to return it. To get a loan, many friends begin to manipulate their peers so that they can get the money easily.
Always Keep Security For the Larger Sums
If a friend of yours has demanded a larger sum of money, it is imperative that you ask something for security. For example, if your friend has asked you to borrow them £5000, you need to seek something, maybe an expensive item or a product from them as a security. Even if you are being asked by one of your greatest friends in life for money, you need to think with your brain, instead of letting your heart pour in. Secondly, if your friend is honest about returning the loan, they will never shy away from putting something forward as security.
Jot Down Everything
When lending money to your friends, make sure you write down everything. Not to forget, if you don’t put everything in writing, it will be hard for you both to gravitate your agreement towards a healthy conversation. So it is crucial for you to keep everything in written form till the loan is repaid. Because life is unpredictable, you never know when your friend might get repulsed from their own words and change the statement. In severe cases, people even start to sue each other for money. So it is in your best interest to put everything in writing.
Set Loan Terms
Before you give money to your friend, it is imperative that every critical term is provided in writing. For example, the amount to be loaned, the date of borrowing, contact details of the borrower and lender, any interest charges, etc. Secondly, when it comes to larger sums of money, you can settle for a registered written contract with your friend, as discussed earlier. Furthermore, if you want to have eyewitnesses for the event, you can ask one or two friends of yours to be available on the spot.
The Don’ts of Lending Money to Your Friends
Relying on Verbal Assurances
When lending money to your friend, never rely on the verbal agreement. Not to forget, it is common for people to engage in verbal spats over the change of statements. Sometimes, friends believe the borrowed money was nothing but a gift. So as discussed, you need to create a demarcation between money as a gift and as a loan. Because a loan has to be repaid, no matter what the circumstance is, it is best to have everything in the form of a written agreement.
Lending Money to Someone Who You Know Will Not Repay
All of us have friends who are always roaming around with debt problems and different financial crunches. Although we’re not suggesting you keep away from them lending money, when you know they won’t be able to return, it is going to be a big mistake. Secondly, if you decide to lend money to such a friend, you need to know that it will eventually jeopardize your relationship with them. Secondly, if you work on a budget throughout the month, there is no need to lend too much money to any friend of yours.
Lending Money to People Who Aren’t at Work or Running a Business
When choosing the borrower, you have to be mindful of several factors. For example, if two of your friends ask you for money, you should choose who is actively involved in earning money through a job or business. Such a person can be trusted because they will eventually be able to return their finances on time. However, lending money to a friend who hasn’t worked for a long time is nothing but a foolish decision.
Blindly Trusting Your Friend is Not Good
Planting a smile on your face and giving a large sum of money to a friend who has always had a terrible history with debts is a very bad decision. Even if you are being asked for money by a very dear one from your family, agreeing to their verbal assurances is not a thoughtful decision. If you are sceptical about such people, guide them through guarantor loan lender top tips. This way, such a friend of yours will be bound to return money to the professional loan providing organization on the web.
Agreeing to Vague Terms
Some friends can be very smart when it comes to borrowing loans. They will manipulate you by sifting through the memory lane of the happy times until you agree to give them a discount on the total amount borrowed. Never fall for such a trap and don’t agree to any vague terms about the repayment of the loans. Keep in mind, as time passes by, such friends tend to make excuses for not returning the loan on the due date, so it is best to have a written agreement to avoid any verbal spat.