Lending Money To People You Know
Often people seek my assistance after lending money to someone they know and being unable to recover the money. Typically, the borrower is desperate, needs the money urgently and promises to pay it back “straight away”. Needless to say, after a few years not one dollar has been repaid.
Here are some golden rules to follow if someone asks you for a loan which could save you a lot of angst:
* Only lend the money if you can afford to lose it. If you are going to need the money yourself in the near future, save yourself the stress and keep it.
* Always put the loan in writing. The lack of evidence that a loan actually occurred can come back to bite you especially when the borrower claims it was a gift. In any case, if you have to go to Court, a simple loan agreement makes your claim easy to prove.
* Set a firm date for repayment of the money and stick to it. Once you allow an extension the borrower will know that punctual repayment is not of prime importance to you and will exploit that in the future and you will be whistling for your money for a long time to come.
* Only lend the money if you can afford to lose it. If you are going to need the money yourself in the near future, save yourself the stress and keep it.
* Always put the loan in writing. The lack of evidence that a loan actually occurred can come back to bite you especially when the borrower claims it was a gift. In any case, if you have to go to Court, a simple loan agreement makes your claim easy to prove.
* Set a firm date for repayment of the money and stick to it. Once you allow an extension the borrower will know that punctual repayment is not of prime importance to you and will exploit that in the future and you will be whistling for your money for a long time to come.
* If there is any delay in repayment, get a lawyer to send a letter of demand threatening legal action. Don’t wait months or even years hoping it will resolve itself. It’s your money!
January 2019