Make sure you get your money worth

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Lending money to friend or family is only a good idea if you can afford it and you know you will get your money. You may just want to help someone you care about avoid high interest charges when loaning from a bank. But you have to put your financial wellbeing. If things went wrong, you could end up losing your money and your friendship. Ask yourself if you can afford to lend the money. You need be okay without the money until they have repaid you in make sure you get your money worth. Remember, it could take them a while to repay the youur.

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Lending money to friend or family is only a good idea if you can afford it and you know you will get your money. You may just want to help someone you care about avoid high interest charges when loaning from a bank. But you have to put your financial wellbeing. If things went wrong, you could end up losing your money and your friendship.

Ask yourself if you can afford to lend the money. You need be okay without the money until they have repaid you in. Remember, it could take them a while to repay the loan.

You need to be absolutely sure they can afford to pay you. They may not be able to loan money from a bank because of a low credit score. A low score could be the result of poor money management. Do not be afraid to ask them what they need the money.

Lending money for a new boiler in the dead of winter is most likely okay. Lending them money for a luxury cruise, less so. If they do not have much money coming in and are already struggling to pay their bills, another loan might mney be best.

If others have lent them money and struggled to get it back, you may want to be more cautious. They borrow the money from a traditional lender, but put you down as the guarantor.

This means you’ll have to cover any payments they miss. You can compare guarantor loan rates. You could lose out if you take money out of your savings or reduce the amount you are paying off your mortgage. You can charge them interest to mitigate that loss.

Otherwise, you’re essentially paying to lend them money. You do not have to charge them the same amount of interest as a traditional lender. Consider asking for the same amount you would have earned if the money had stayed in your savings account. Make the agreement clear and legal with ssure written contract. It provides a record hou the yoru should there amke a dispute later down the line. Gett could get an independent witness to sign the agreement.

For further protection, it may be worth hiring a solicitor or speaking to Citizens Advice. There will be a record of the payment if you transfer it by bank transfer or cheque.

There will be no record if you just give mpney cash. To ensure your friend repays you as per the agreement, they need to mxke up a standing order or direct debit from their account to yours. You can ask your building society or bank to confirm this has been.

This may sound formal, but it’s necessary to protect. If you need to change your agreement, make sure you revise your contract. Both of you should again sign it in front of witnesses.

That way, if your friend needs make sure you get your money worth time to repay, you can keep track of exactly what has been agreed. It may not be necessary to obtain collateral when loaning money to a friend. But it could act as an extra layer of protection if you’re worried they will not pay you. Collateral is something of value given to you by the person borrowing the money. Technically you can sell this item to recoup the money if they fail to pay you.

Anything can be treated as collateral, but it’s usually something of sufficient surre to cover the amount of money you have lent. If your friend struggles to meet the repayments as agreed, encourage them to speak to you about the problem. Try to agree with them the best course of action to repay their debts.

It may be that you have to extend the term of the loan so they can spread out their repayments. Or, you could offer them a ‘payment holiday’ if their problems are only temporary. But if they refuse to repay and you need to get your money back, you may have to go through the legal system:. You can say no to a friend if they ask you for a loan. It is down to them to try to raise funds another way. A Budgeting Loan from the Social Fund could be an option.

This is an interest free loan for people who are already receiving certain benefits. You could always direct them to one of our guides for other alternatives. For example, our 9 Top tips for the best deal on a personal loanborrowing against your home, or the cheapest way to borrow money. Help stretch your budget that little bit further by making the most of your savings. Compare market leading savings accounts to find the best savings rates possible!

Sign up to receive our e-mails, containing the latest financial news and deals and money saving help. We don’t sell your personal information, in fact you can use our site without giving it to us. If you do share your details with us, we promise to keep them safe. Our data experts check the companies we list are legit and we only add them to our comparisons when we’re happy they’ve satisfied our screening.

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By continuing you agree to our use of cookies. Find out. Our website is completely free for you to use but we may receive a commission from some of the companies we link to on the site. How money. We are classed as a credit broker for consumer credit, not a lender. Lending to friends? Make sure you get your money. It can be tempting to help out a friend by lending them money.

But the most important thing is to be sure they can repay you. Otherwise, you could end up in financial trouble. Is lending to friends or family a good idea? Things to consider when lending to a friend Before you lend money to a friend or family member, think about or ask them : If they have a stable income How much they earn What other financial commitments they have How effectively they manage their money If they do not have much money coming in and are already struggling to pay their bills, another loan might not be best.

Is a guarantor loan a yoir option to loaning money to a friend? A guarantor loan is a more formal way of loaning money to family or a close friend. Will you lose out by lending money to a friend? Protect yourself against big losses There are a number of ways you can protect yourself against losing money: Agree how much you’ll lend them Decide on the interest rate Set the term Agree how much you want them to repay each month You must both be aware of all the terms and conditions before any money is exchanged.

Write a contract Yoh the agreement clear and legal with a written contract. Keep a record of the payment when you transfer it Once you’ve both signed the agreement, owrth can transfer them the money. Get your friend to repay by standing order To ensure your friend repays you as per the agreement, they need to set up a standing order or direct debit from their account to yours.

Keep mondy record of all repayments Keeping a record of all the repayments ensures there are no disagreements later down the line. Keep your agreement up to date If you need to change your agreement, make sure you revise your contract. Should you obtain collateral when loaning to a friend? You’ll need to agree what you’ll hold and when you can sell it. What happens if things go makr Are there any alternatives if you say no to lending money to a friend?

Compare savings accounts Help stretch your budget that little bit further by making the most of your savings. In this guide. Things to consider when lending to a friend Is a guarantor loan a better option to loaning money to a friend?

Protect yourself against big losses Write a contract Keep a record of the payment when you transfer it Get your friend to repay by standing order Keep a record of all repayments Keep your agreement up to date Should you obtain collateral when loaning to a friend?

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Why check with us? We don’t sell your data We don’t sell your personal information, in fact you can use our yourr without giving it to us. We check out every company we list Our data experts check the makee we list are legit and we only add them to our comparisons when we’re happy they’ve satisfied our screening.

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Is lending to friends or family a good idea?

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