Some people often choose not to lend money because of the slight chance that they would have a difficult time getting it back. But what if your closest friend or even one of your relatives is the one asking for financial help? How would you respond?
Obviously, you'd lend them the amount they needed because you know them very well and trust that they would pay you back on time. However, there is still a tiny possibility that they won't be able to do so. So, what should you do?
Lend what you can afford
First, you are not a bank with an endless supply of money. Second, even banks set a certain amount when they give loans. "Since there's a chance that the money might take a while to be returned to you, or not at all, only lend an amount that won't leave you broke," says financial planner Alexander Corpuz. Even if you can afford what they're asking, save some for yourself.
Corpuz suggests setting an agreement with the person you're lending money to, no matter how close they are to you. Ask them when they'll be able to pay you back and set the terms of payment. If they get offended, then take it as a sign that you shouldn't lend them the money to begin with.
Learn to say no
"If you're really not comfortable with lending money, then it's all right to refuse," notes Corpuz. It's your money and you have the right to say no. Instead, you could ask if there are other ways you can assist them, if not financially.
Expect the worst
Corpuz explains that since you're lending your money to close relatives or friends, do expect that they won't be able to pay you back at all. Prepare yourself if ever the worst-case scenario happens. If it does, then you can opt to not lend them any money for the second time around.