Cons of Lending Money to Family
The bonds of family can be severely tested throughout the years, and one of the greatest tests such bonds may bear can be when a relative is in need of some financial assistance. Even the best relationships between relatives can be severed because of the pressures a loan can create between them.
Here is why you should think carefully before lending money to a family member.
It is not legal and neither is it guaranteed
Unless you make a legally binding agreement when lending financial assistance, there is no legal action you can take to ensure your relative will pay you your money back, not that many people would like to think of this option. This is where family trust is greatly tested. Essentially, your relative would have to be as good as his/her word. Beyond that, you have no guarantee you will get paid back.
The loan could affect your relationships
Even if you are good for the loan, and you are happy to oblige your relative, one of you, either the lender or the receiver, will feel pressure from the loan. You might feel pressure because that money you lent could have been used for a much needed expense later on, or your relative would feel guilty over the money he/she cannot pay back.
If you lived with such a relative, your relationship with them might be strained and it could be an awkward, maybe even unbearable experience to face them on a daily basis. Even if the relative was not immediate family, every family occasion you would go to would be soured by the knowledge of the loan.
What if they cannot pay it back?
This is a reality we all must face. Sometimes, a person can be going through such a difficult space financially that it might take years to pay back a loan, depending on the amount. Would you be able to endure the wait? What if you die before the loan can be repaid? In cases like this, you would need to decide what is more important to you, the loan or the relationship with family.
Sometimes lending money is not the answer
Unless your relative is in dire need of money, a loan would be the last option you should take when helping him/her out. In fact, lending money might exacerbate the problem, and that is the last thing you or your relative need for your relationship.
Think carefully before lending that money
At the end of the day, this is a decision that requires a lot of consideration. If the loan is the only way to help your relative, make sure you take precautions.