Who hasn’t borrowed money from a family member? Family is one of the first places you might turn if you find yourself in a financial jam.
But if you’ve ever been on the lending end of this family meeting, you know how hard it is to get your cash back in a timely fashion — if ever.
LendingTree recently surveyed more than 1,000 Americans about their experiences with borrowing or lending money among family members and found that more than 25% of those who have lent money to a family member said they would never do it again.
Why are they feeling so stingy? Probably because almost one-third of the people who told LendingTree they had borrowed money admitted they never paid back the loan.
We’re not talking huge loans, either. More than 42% of respondents said the largest loan they took from family was between $1,000 and $5,000. About 36% said the largest amount they borrowed was $1,000 or less.
But consider this, too: More than 37% of those surveyed said a loan of less than $500 is still significant. Genetics aside, lending money to a family member is still a big decision to make.
Lending Money to Your Family: Nice, but Potentially Dicey
Turning to the Bank of Family can cause drama, even if the loan gets paid back. Of those who had borrowed money from or lent it to family members, frequent results included resentment, hurt feelings, verbal arguments, decreased contact and, perhaps the most difficult of all, uncomfortable holidays or dinners. Yikes!
But sometimes family means making sacrifices to help the ones you love, even if there’s a big chance you’re not going to get that money back for a while (or ever).
If someone asks you to borrow cash, remember never to lend out more than you can afford. Ask yourself, “If I never saw this amount of cash again, would it make it harder to reach my own financial goals?” If the answer is yes, tell your loved one it’s just not going to happen.
If you’re in a good position to help, consider making a contract to spell out the details of the loan. Having a written agreement can help keep repayment on track — and hopefully will prevent you from having to nag.
Thinking of asking a family member for some cash? Propose a plan that details what you need the money for and how you plan to pay back the loan.
Promising not to make Thanksgiving dinner awkward might help your case, too.
Lisa Rowan is a senior writer and producer at The Penny Hoarder.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
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