How to Lend Money to Family

Step-by-Step Guide

1. 1

   Step 1: Determine whether the family member asking for money is responsible enough to return it.

   Only you can decide if a loan will be paid back.
   
   Obviously, a family member who is habitually overspending and is currently in debt would not be a good person to lend money to.
2. 2

   Step 2: Make sure that you have the money to spare before lending money to family.

   Do not get yourself in a financial hardship just so you can bail out a family member.
   
   The only time you should ever lend money to family is when you can spare the amount.
   
   For this reason, the money should never come out of your current budget, your hardship savings, or any retirement funds.
   
   The truth is you still have to be prepared that the family member will not pay back the loan. , Remind the person that this is a loan; that you do expect to receive interest, assuming you do, and that you expect the money to be returned by a certain period. , Be realistic about how much can be paid during what period of time.
   
   Don't set your family member up to fail.
   
   Smaller payments are always easier to pay off than the whole amount, not just for the family member, but also for you.
   
   This way you can see your money being returned. , If you prefer, call in a third party to witness the agreement and its specifications.
   
   By doing this, your family member will understand that you are serious about getting the funds back.
   
   There are many resources online that offer tools for establishing contracts.
3. 3

   Step 3: Discuss your expectations regarding a family loan before coming to a final decision.

4. 4

   Step 4: Establish a payment plan that meets the budget of both you and your family member.

5. 5

   Step 5: Write up a family loan contract with all the details of the loan and make it official by having you both sign it.

Detailed Guide

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