Credit.com highlights 3 easy steps to help you lend money safely to your family and friends.
If a friend or family member is ever in need most of us are more than happy to lend a helping hand even if it involves financial support. However, for those friends or family members that can’t get a personal loan from a commercial lender, most likely due to damaged credit or no credit, proves to be a risk for you, as the lender. So if you do choose to lend to them it’s always a good idea to protect yourself and your relationship, because we all know that sometimes things turn sour.
Credit.com highlights 3 steps, the first being:
Setting an interest rate, one that is competitive with one from a commercial lender can work in both yours and the borrower’s favour. An interest rate provides you with interest similar to what you may get if you were to put it into a savings account. It also offers you security, for if the borrower agrees to pay the interest this may prove they genuinely need the money.
When lending to family and friends credit.com always recommends writing out your agreement. If you’re uncomfortable with this be assured you’ll be even more uncomfortable with having to remind them and even of chase up the repayments. Again if they’re in serious need of financial support writing down some details and signing a document will prove they’re genuine about the loan. Be sure to spell out the terms, such as how much is borrowed, the time period, interest rate and repayment details.
Be sure to check out Credi.com who will help organise all these details for you and create a loan agreement as well. Plus you’ll be able to manage it on the platform once it’s agreed to and eSigned.
Let’s face it, it’ll be easier for the borrower to make a late payment or even miss a payment to you than to a commercial lender. Be sure to include details of payments due dates, fees and how payments will be made (bank transfer, cash etc.). With Credi, you will be notified of upcoming repayments and the borrower will also receive reminders of late payments. The platform also allows you to label each repayment as cleared, forgiven, overdue or paid. This helps both parties track repayments, in turn helping to prevent disagreements on the when payments were made and the remaining amount owed.
Lending money to friends and family members who can’t get a loan from a traditional lender always has its risks. However, if the right precautions and steps are taken you can avoid hurting feelings and ruining relationships. Always be clear when writing up the agreement and voice your expectations.
Be sure to open your free account with Credi and create your loan made with family or friends. Our platform will take away the stress and worry of lending informally. Credi helps structure a loan agreement, put it in writing, and manage & track the loan from start to finish.
Credit: Gerri Detweller
Tim K. Dean, Credi Founder | Commentator & Expert on Family Lending, Bank of Mum & Dad and Neo-Credit Scores is available for media interviews and appearances. More…
Credi Pty Ltd is a Financial Technology business, not a marketplace lender. Our mission is to change the way we lend money. We want to empower people to help each other and take control of their financial relationships without creating friction and stress.
Credi is the World’s #1 loan management platform for private lenders.