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Lending Money To Loved Ones – Yay or Nay?

Debt Collection

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Think about this scenario, your good friend approaches you with a dilemma they are facing- they need money, and they ask you to help. Is it a good or bad idea? Let’s discuss it from a debt collection perspective.

Quick and easy payment methods

Lending and borrowing money have never been easier if you consider all the easy ATM-options you have, like e-wallet, instant pay, and more. However, getting your money repaid is a lot harder than the easy and quick systems of payment we have nowadays.

The elephant in the room

Borrowing money can be very tricky and detrimental to a relationship when it comes to asking for it to be repaid, because, let’s be honest- you would much rather chat about your weekend than asking for a loan to be repaid. Its never as simple as: “hey, by the way, that money I loaned you, when can I expect it to be repaid?” You might not be that flippant about asking for repayment – most people would not be, but there will likely come a time that you find yourself in a situation where you need the money repaid.  Asking for repayment however, may be so awkward that you consider just writing the debt off, since seeing your debtor becomes a situation of awkwardness.

The cash flow issue

The only non-emotional way to lend money to someone, is to not expect it to be repaid. However, in this scenario the loan was not a gift and reminding a defaulting debtor of repayment could harm or even end a relationship. The fact that your friend needed to borrow money in the first place means that they have a cash flow issue which normally is not resolved in a matter of a month or two. It therefore follows that they most likely will not be able to repay the money borrowed any time soon and potentially not at all.

Can I say no?

Ask yourself if saying no isn’t a better option. Weigh up the pros and cons. Could this affect your relationship negatively? Is this the relationship worth losing? Is your relationship strong enough that you could ask for repayment should they not pay you without prompting? If you do find yourself in a financial pickle and you need that money back, you might run the risk of ruining your own credit history and that alone will annoy you enough to estrange yourself from that person. So yes, you can say no! If your fear is ruining a relationship by lending money to a person, be straightforward and say so.

Doing it the right way

If you do trust the person asking for a loan enough and feel strongly about helping them, make sure that you follow a proper procedure and put the correct paperwork in place. Just because your debtor is a friend or family member, does not mean that you should not protect your rights in this regard. The best method is to ask the person borrowing the money to sign an acknowledgement of debt wherein strict payment terms are stipulated. This document will give you the proper foundation to issue summons against the defaulting debtor should they not repay your loan to them.

Be cognisant of the fact that, if your friend does not repay you out of his or her own free will, you will likely end up losing that relationship if you decide to pursue any form of legal action against him or her and therefore, in conclusion, don’t lend money to any friend or family member that you are not prepared to lose.



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