Four Tips For Loaning Money to Family Members

By
Services for Real Estate Pros with Think Glink Media

Economic woes in the past few years have made it more difficult for individuals to obtain traditional lines of credit. So when it comes time for them to put a down payment on a house, make home improvements, or buy a car, many are turning to family members for the money. But lending money to a relative brings its own set of pros and cons. 


Personal finance expert Roger Wohlner has written an excellent post offering his four tips for lending money to someone in your family. On the "pro" side, your family members won't check your credit score. On the "con" side, failure to repay the loan could ruin your relationships or your family member's finances. 

If you're approached by family or a close friend and you have the money to lend, Wohlner offers four excellent tips to make sure the loan doesn't ruin your relationship or your finances. See his four "rules" here: http://retirement.equifax.com/2011/02/4-tips-for-loaning-money-to-family.html

 

 

Ilyce Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.com, The Equifax Personal Finance Blog and CBS Moneywatch She is Chief Content Strategist at RealtyJoin.com, a community for real estate investor

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Rainmaker
283,058
Steven Pahl
Keller Williams Tampa Properties - Tampa, FL
Real Estate Consultant Tampa, FL 813-319-6423

Good rules to follow, but a firm "No" is simpler.  Fortunately, the few of us that are left are all doing well and I don't anticipate tis being a problem!

Feb 08, 2011 10:24 AM #1
Rainmaker
374,515
Bob Jakowinicz
National Realty Centers Livonia--Bob Jakowinicz - Livonia, MI
734-578-6561 - Michigan Real Estate Agent

Oh this can get messy really fast.  I've seen some relatives take money and not really seem like they ever intended on paying any of it back while others make it a lifes mission to pay it back.

Feb 08, 2011 10:26 AM #2
Rainmaker
172,713
Karin Lundeen
Keller Williams Realty - Denver Southlands - Centennial, CO
Realtor Centennial Homes For Sale

Usually try to stay away from lending money to family members...but good tips if it is necesary!

Feb 08, 2011 10:27 AM #3
Rainer
237,864
Gerard Gilbers
Stingray Performance Marketing - Waldorf, MD
Your Marketing Master

Good points. I typically do not lend money unless I expect to lose it! One other point he didn't mention was that you must also properly enforce the agreement; late fees, penalties, etc. for it to be considered a valid contract. 

Feb 08, 2011 10:28 AM #4
Rainmaker
272,070
Ron Tarvin
Luxury and New Construction in Katy & Cypress TX - Katy, TX
Broker, Katy, Houston, Cypress 77450,77494,77095

This is a lesson we've been discussing wth our 15 year old daughter who spent about $50 of her Christmas money when a friend asked her to pay for something and "she'd pay her back later".  She could have used that money a couple of times but the situation is not comfortable for her to ask her friend for it back...that's why I told her, if you loan to a friend or family member, it's often best to think of it as a gift.   If it comes back, that's great but if not, you didn't expect it back anyway.

Feb 08, 2011 12:01 PM #5
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Rainmaker
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Ilyce Glink

Best-selling author, award-winning TV/radio host.
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