The loan between individuals can very quickly turn into a nightmare, especially when it comes to a loan granted to a friend or a close relative. A real discipline is necessary to avoid the many pitfalls found on this path. By observing certain rules, it is nevertheless possible to get out of the game and avoid ruining your personal relationships for a loan that goes wrong.
You don’t have to lend anyone money. Many friendships have also ended following unpaid loans. Therefore, you should think carefully especially if it is a large sum. Avoid lending money to people who tend to behave irresponsibly. These people may be close to you, but that doesn’t mean they’re good candidates for a loan. Useless on the other hand to epilogue if it is about a few euros to cover a meal.
Lending money to someone who just lost their job and needs to pay their rent might be a good idea, but not someone who wants ,000 to throw a party. in honor of his girlfriend.
Lending money to someone who has a business project is a good thing, but you have to take the time to check the viability of the project and the borrower’s motivation. It is necessary to take the trouble to reflect when it comes to large amounts and above all not to give in to sentimentality, or even blackmail. Do not hesitate to say no if you are sure that the borrower will not keep his promise to repay.
Helping someone through a financial crisis is commendable and generous, but that doesn’t give you the right to publicize it and tell everyone about it. Respect the other person and their situation by keeping the entire conversation and the amount you have lent them confidential. Don’t tell family members without their permission and don’t advertise your generosity on social media. If you help this person, the reward is in the gift and not in what others will think about it. Keeping these things private also builds trust between you and the person in need.
The loan between individuals has limits that it is better not to exceed. Helping someone in financial distress is not objectionable in itself, but it is useful to set limits in order to avoid being the person they will automatically turn to whenever they need money. Set clear limits by determining reasonable monthly payment terms.
When you agree to lend the other person money, make sure it’s a one-time arrangement so they understand that you won’t always be there to help them all the time. Always take the trouble to explain to him that you are making an effort to help him so as not to be seen by everyone as a dairy cow to be rushed to at the slightest financial problem.
Even if you are wealthy, don’t flaunt your financial wealth in front of those asking for financial help. This may make people unwilling to repay you, as they will feel that the loss of the loaned money will not bother you at all, due to your financial well-being.
When you lend money to a friend or anyone, there is always the risk of not being repaid. Therefore, before deciding to lend money, think about how you will be affected if you never receive that money back. A small loan of €30 to a close friend probably won’t cause much harm if he fails to repay you, but a loan of €10,000 will not.
Left unpaid, this type of loan will harm your relationship and your financial health. Remember that you should never lend more money than you can afford to lose. If you cannot meet your own financial obligations in case your debtor does not pay you on time, then you should definitely not lend money.
Create a legal contract especially if you are lending a large sum of money. It is indeed essential that you create a document that establishes the terms of the loan. This document will specify who the creditor is, who the debtor is and how much money is lent. It will indicate when the borrower is expected to repay the money, and whether the sum should be paid in full. The document must also include any interests.
This document is intended to protect you in the event that your debtor is unwilling to reimburse you. It also serves to clarify and make explicit the terms of the loan in order to avoid any misunderstanding. To be valid, the document must be dated and signed by the borrower. You can also sign it, but this is not necessary. It is also interesting to legalize the document or have it drawn up under the signature of a notary. Such a document will have more legal value, because it is subject to verification by a third party who will serve as a witness in the event of a dispute.
Do not skimp on deadlines and accept flat apologies in the event of late payment. Do not hesitate to send a reminder if the deadline is approaching. These precautions will make it clear to your debtor that you value your money and that you are considering all eventualities to recover it. Showing compassion is a mistake, because it could send a negative signal to the borrower who may believe that non-repayment would be a negligible loss for you. In this case, he could simply decide not to keep his promise of reimbursement. In case he refuses to respect the clauses of the contract, do not forget that you have a document which could legally compel him to do so.