Skip to main content

How to Encourage Your Family Member to Get a Personal Loan (Instead of Borrowing From You)

Being constantly approached by a family for a loan can be very annoying, and also a source of embarrassment because you want to say no, but find it difficult to do so. There are many downsides to lending or getting a loan from someone you know. This is applicable to even your own kids. It may be more beneficial for them to get the loan from a lender, and you want to advise them to do so, but do not know how. Here are some tips to help you encourage your family member to get a personal loan, but first let us look at why it may be a bad idea for you to supply the loan.

The Downsides of Social Lending Between Relatives

1. If a lender refused to give a loan chances are you should too. In many instances family members who had been turned down by a loan institution do end up defaulting on loans raised from family members. This means it may take forever or never get back your money.

2. A default on a family loan could cause to you to have to sue your own in order to recover your funds. This could lead to a huge financial and emotional strain on you and your family.

3. The family member may start showing signs of irresponsibility by going on spending sprees or taking out a new car instead of honoring the loan payment.

4. There may have been insufficient attention to making the agreement legitimate by asking the relative to sign off on an agreement. This could leave you in a bad spot without any proof it was a loan.

5. You may not have known the individuals money management style before, and was therefore unable to adequately assess your risk.

6. You may find you have breached tax laws because you chose to forgive balances or payments or charged too little on the interest rate.

Tips on Encouraging a Family Member to Get a Personal Loan

1. It may not be easy, but it is time to be brutally honest. It is time to assist your family by giving them advice rather than money. Firstly declare to the individual that you will not be able to assist with another loan. This will remove from his/her mind any thoughts of trying to be more persuasive.

2. Let the family member know that in any case you would opt to use the services of a social lending company so you would not have to deal with the hassle of recollection. This would further serve to let them know they will not be getting a direct loan from you again.

3. Now offer them some advice on the benefits of getting a personal loan as opposed to borrowing from you. Their credit score can be improved in a very short time and the loans are short term loans.

4. They will also benefit from advice and assistance from a professional financial adviser, and finally learn to take control of their own finances. This would allow them to become financially independent and no longer have to bother family or friends for a loan.

5. Personal loans are another variety of loan that helps to boost credit history once it properly managed.

Constantly helping out a family member in financial crisis will never help them to grow financially. Giving them advice that leads to financial freedom is of more value than providing them with instant cash.

Peter Coppola is a personal finance and insurance expert. He mainly writes for personal finance and insurance blogs. Visit EasyFinance to learn more about short term finance options.
References:

http://www.moneycrashers.com/why-you-should-not-lend-money-to-friends-and-family/

http://www.justmommies.com/family-life/family-finances/the-family-bum-how-to-deal-with-family-members-who-constantly-ask-for-mo?page=0,1

Comments

Popular posts from this blog

Low interest credit cards - how to make them work for you

Credit cards are borrowing instruments, unlike debit cards where you already have the money. Banks are there to make money too. Just like high street stores, they hope to maximise their profits within the rules. So it’s important to understand the basics and find a credit card that’s right for you – you can compare low APR credit cards here . Now you know the rules, let’s find out how to play the game. The financial services industry charges interest on the money that it lends out. Let us assume you borrow £100 on your credit card and keep it for exactly one year before you pay it back. For the purposes of this article, we will assume your loan attracts 8% interest per year, which is the Annual Percentage Rate, or APR for that particular transaction. Practical example

Why it’s important to save for retirement

While retirement may seem far off in the distance for some, financial experts say you’re never too young to begin saving.  In fact, the earlier you calculate your retirement needs and start building your nest egg, the easier it will be to create a viable plan for the future. Many experts advise you begin saving a percentage of your income for retirement as soon as possible, no matter how little the contribution may be, as it’s possible the Social Security benefits millions of people currently depend on may be in jeopardy.

What are the Consequences of Overspending in Life?

How overspending can ruin your financial life? With today’s expenses and their prices, it can be very hard not to overspend. Still, that isn’t an excuse to stray out of your budget. You know why? It is because overspending can only lead to more problems than you think. Overspending can affect your whole life. With all the possible consequences, it may jump from one problem to another. Unpaid bills All the excessive shopping with your credit card can cause steep bills at the end of the month. If you keep on using your credit but don’t have enough money to pay for it in the end, then you’re surely in for a huge financial disaster. This will turn out to be missed payments, and missed payments will ruin your credit report. Missing out on payments will get your credit report marked for 7 years or more. And you can’t get rid of them by finishing them off. Credit report Overspending can cause a chain reaction of events. Once you get your bills due to overspending, it’s possible for you to mi

The Top 4 Reasons People Fail at Budgeting

Budgeting isn’t easy, and many people experience difficulty trying to get the most out of this essential financial tool.  While the concept may sound simple, adhering to your budget could be a lot harder than you might think.  To help you experience success, here are the top 4 reasons why people fail at budgeting .

How does a Prepaid Credit Card work?

Can They Really Be a Solution to Avoiding Credit Card Debt? When it comes to plastic, there are a lot of choices out there. Not only do you have the choice of credit card , debit card, or prepaid credit card, but you also get to decide which financial company you want to use as your card provider. Credit cards and debit cards are both risky. Credit cards can help put you deeper into debt, while debit cards give thieves and collectors access to your entire bank account. A growing number of people are finding that prepaid credit cards are becoming the best option. What Are Prepaid Credit Cards? Prepaid credit cards look and act just like a credit or debit card, except you put the money on the card before you make any purchases. You are only allowed to spend as much money as you have pre-loaded on the card, which means that you are not at risk of going into credit card debt from overspending. These cards also keep your money safe, because thieves will be limited to the amount that is on t

How to Make Your Title Loans Safe and Sound

Although title loans are tagged as risky, innumerable folks still use them for fulfilling their different financial obligations. Therefore, such loans are not completely bad because their significant use despite the risk factor says a lot of their pros. This makes it vital to discuss how these loans should be used so that the risk factor can be minimized up to a great extent. For those who are not aware of, the risk of title loans crop up in the form of consequences when you fail to pay back the loan. With such a failure, you are surely going to lose your car as well as decrease your credit score further.

How Equipment Loans can help your Business Thrive

Image via gettyimages Different companies enjoy common benefits from capital equipment. Machinery has direct and indirect effects on your bottom line. A new oven and forklift each make your business more productive. Meanwhile, interest and depreciation expense are tax write offs that indirectly improve business profits. However, your business may not qualify for a general purpose loan to buy much needed equipment. Some obstacles include: