Dave Ramsey's Debt Myths - Don't Lend Money to Family & Friends
Lending money or co-signing no loans for family and friends can seem like a charitable idea but the danger is real. Forms, Templates, and online debt fighting ...
In general, it is a bad idea to lend money to friends. If the friend does not pay the money back, you have lost a friend and money. Giving them a (small) portion of the needed money is a good alternative to a loan. If you are in a committed relationship, be sure to talk with your spouse about the loan before giving it.
When Sarah Lee Marks's friend needed help with a down payment on a house, Marks and her husband loaned her the money. The couple drew up a written agreement, specifying a set calculation for the interest, the payment schedule, a per diem for any late payments, and a time frame for when the loan was to be paid off.
States vary, but each has laws regarding lending money. Virtually all of these laws regulate those who lend money on a regular basis as part of a business, but a few still may have application to private loans. Examples may include laws against usury (charging excessive interest), collections methods, and maximum loan amounts.
How To Lend Money To Friends And Family The Right Way. Also, you may be depleting funds that you might need yourself, says Irene S. Levine, Ph.D., psychologist, author and producer of TheFriendshipBlog.com. Even if you’re sure that the asker will pay you back, it’s hard to know if you should proceed.
Agreements. In general, you can lend money in any way you wish. However, verbal agreements offer a lender the least amount of protection if the debtor defaults. At a minimum, putting the terms of the agreement, including terms of repayment, in writing offers better protections and makes it easier to prove the agreement in court.