52 Simple Ways to Manage Your Money – 37. Well…Onty ‘TIL Tuesday – Lending Money
What it is…
A method of earning interest income by providing a specified sum of money for a limited period of time.
A loan should always be written down, preferably in the form of a promissory note.
How it helps …
Provides extra income— sometimes more than you might get from other types of investments.
May enhance your assets if the promissory note is secured by the pledge of property, because if the borrower defaults, you take over possession of the property in lieu of payments.
Key Items to look for…
Whether or not you can afford co lend the amount without disturbing your investment plans and goals.
Rate of interest.
The overall length of time that the loan will run.
The amount of each payment, when each payment will be due, and the penalties for late payments.
Security for the debt, like an item or items that the borrower will pledge which guarantees that the loan will be repaid.
Where you lie in the spectrum of money awareness.
One hour or less to set up.
Fifteen minutes after every payment is received to keep records, more if the borrower defaults.
Keys to action …
Obtain materials: a promissory note (two copies) and a payment record.
Personal policy or philosophy: Do you lend money to others? Do you lend to friends and relatives?
SET IT UP
Establish your own persona] policy.
Will you lend money or not? To whom will you lend money?
STEP ON IT
Stick to your policy no matter what.
Don’t let others make you feel guilty about saying “no.”
STEP ON IT +
Keep personal and business matters separate.
Your feelings about lending to a friend or relative.
Whether or not you find it difficult to ask for the money when the borrower is late in making the payment.
Consider how you might feel taking the borrower to court if he or she defaults and you must foreclose.
But what if …
The borrower skips and I lose everything?
- This is part of the risk. Choose carefully the persons with whom you deal. Know their credit background and make sure that the secured item is equal to or greater in value than the amount that you are lending.
When I think of lending money to a relative, I…
One of the things that makes lending on a personal basis attractive is… ___
If I were to lose money, Mother/Father/Wife/Husband would say…
If I weren’t concerned about what someone thought, I…
The hard part about saying “no” might be…