With the economy still trying to find its way out of the wilderness, reliance on immediate and extended family for social and financial support is peaking. And everyone has been affected by the lack of available financing for a range of products, services, and business needs. This calls for atypical solutions to common problems, and one option is a family loan.
An excellent article that covers “Family Loans 101″ appears in CNNMoney.com. The basic advice is the following:
- there’s an emotional side to lending to family, and only the lender can properly assess their capacity handle this aspect of an agreement
- independent of emotional issues, do a straightforward analysis of whether or not the individual will be capable of repaying loaned funds
- set clear terms for repayment of the loan
- produce a written agreement between the family members, with both signing on the dotted line
- DO NOT lend out of guilt
- if the receiver of a potential loan is at high risk of being unable to repay the loan, brainstorm on nonfinancial ways to help them — there are numerous possibilities
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
