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Should you say Yes to loan between relatives or friends?

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Your friend or relative may borrow money from you when s/he is going through hard times. Should you say Yes to loan between relatives or friends?

1. Can you afford to lose your money? Be prepared to lose your money.
2. How much do you treasure your relationship? If s/he is someone you treasure and are willing to help, then you prioritize your relationship over your money.
3. Is the money needed for a valid reason or something you agree with? Do not lend to fund other’s expense on instant gratification (e.g. car, entertainment system).
4. Can you protect yourself? Ask for an asset of value as collateral, though this might be awkward / uncomfortable for most people. Write up a simple IOU (including names and identity number of lender, debtor, witness, the amound owed, date of the debt to be repaid, date the debtor sign the IOU). Request for some post-dated cheques to hold on to. Note: IOU is only valid for 6 months from date of repayment.

Manage expectations. Be clear of the amount that you can afford. If s/he asks for more down the road, you can say No.


Written by blueroselady

September 13, 2012 at 2:21 pm

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