Lending Money To Family…Should I?

Lending money out to family…whether or not you should lend money to family is a decision many of us need to make at some point. You can find yourself, and the other family member, in a bad situation without careful thought and consideration to the arrangement. Most people do want to help their family, especially someone close like a child, parent or sibling. There are many things to consider when making this important decision. Here are my top three considerations when faced with this request.

Should I Allow My Family To Borrow From Me?

1. Do I have the money to give without placing a financial burden on myself? This is important to consider if lending money. I believe that you should not lend money to a family member if you don’t have enough money for yourself or your own family. If lending the money out puts a financial burden on you, the answer should be no (even if they need the money for an emergency or a good reason).
2. What is the money for? I have loaned money out to my mother before and separately to my sister. My own rule is that the money has to be for a need. In my own case, this included paying utility bills during a sickness and paying for a down payment on a reasonable vehicle required for work. You make your own rules. If the reason they need money doesn’t work for you, then don’t loan it out. You may decide school is a good reason or you may decide it’s not. You may choose to loan money for a down payment on a home, you may not. It is completely up to you and you should be comfortable with what they are using this money for.
3. Does this person have the ability to pay me back and on what terms? I recommend making a very specific plan for the money to be paid back. It should be written down and tracked each month so both parties are always on the same page. This is non-negotiable for me. I have found when things are unclear they almost always go poorly. In addition, no matter how badly my family member needs the money – I only loan it out if there is a viable way for them to pay me back.

Lending Money To Family – Closing Thoughts…

Our last three blogs covered the risks and benefits of loaning money to family and if you should do it at all. Money is a great tool to help people, but it is also a cause of anguish and strife. It is not worth losing friendships and connections with people over money. If you are not in a position to help it is always okay to say no. If you are married or share finances with a partner, it is imperative you are on the same page.