What You Should Look at Before Lending Money to Friends and Relatives

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Money is a common cause of conflict in society, especially when it comes to lending and paying back. We have all had friends or family borrowing money from us. Unfortunately, sometimes when the time comes to pay back, it becomes a struggle.

Here is what to consider before lending money.

Have an agreement

Binding agreements help in solving future problems that may arise when the person refuses to pay. It is good to agree on a date when payment is expected either in writing or verbal agreement. This will help you avoid conflicts that would arise if there are no set timelines for repayment.

Trustworthiness of the other person

Before lending someone your hard-earned money, ask yourself if the person can be trusted to pay over the agreed time. If it’s someone you have not interacted with in the past, it is better to steer clear of any transactions with them.

If you must lend them the money, consider seeking the opinion of friends and family who have interacted with the borrower on a personal level.

Set loan rules

Have personal loan terms which include the loan limit, interest rates if any, repayment periods and repayment method. With clear regulations, asking for your loan back will be easy as the person who borrowed knows the consequences of late payment or not repaying at all.

Your lending ability

While it is humane to help someone when they are in need, sometimes helping can be at your expense. Therefore, always ask yourself if you can give a loan and still be financially stable. Ensure that you don’t get into financial trouble after giving the loan. Once you are sure that lending money will not inconvenience you, then you can proceed to give out the money.

Credit history

Knowing how the person serviced previous loans will be important for you when decided to give out the loan, especially when a huge sum of money is involved. Consult the borrower’s past creditors and hear what they have to say.  Their views will help you determine  whether to give the loan and what amount of money the person can comfortably repay.


If you are unsure about lending out your money, then do not do it. Money is a sensitive topic and it is always good to be careful when discussing money issues with other people. When lending money, ensure that the borrower knows the money is not a gift and that you expect a repayment. Also, do not hesitate to ask for your money once the repayment period elapses.

c/o parents