Sticky money situations: Lending to family and friends
We’ve all been at either end at least one time in our lives. In the best of times; the money is paid back promptly and with no altercations but sometimes; the ordeal becomes a many-year-long nightmare of uncomfortable avoidance of communication or outright denial of repayment.
In Malaysia, and most Asian societies, family ties are extremely important. Couple this with the fact that money as a topic is taboo for most and you’ve got a definite recipe for lending disaster.
So before you borrow/lend money from/to family or friends, consider these issues.
As a Lender
Can you afford it? If you are struggling to make ends meet: giving someone a chunk of your money even in the expectation of getting it back is unwise. RM10 for a lunch is one thing but a larger sum you cannot afford to write it off in the worst case scenario will be problematic.
Who is asking? Consider how you feel about the person who is asking. If your relationship isn’t as close; lending money could create animosity.
How do you feel about lending? Though many consider ‘feelings’ as a trap word: it is very important when you are dealing with family, loved ones and of course, money. Consider how you would feel if the borrower doesn’t repay or spends the money in a way you don’t approve. Will you be able to continue the relationship as it were? Understand that once you’ve passed the money to your friend/family member: you no longer have control over what happens to it.
Set down the rules. Once you’ve considered everything above and have decided to proceed with this loan, set out the rules for lending and repayment. Keep in mind that there is a good chance for default so set rules for what will happen then. If possible (as much as you may not like to do this) put things down in writing. It doesn’t have to be a five page, legal missive: a friendly email or SMS will do just fine. “Hey Joe, so I am cool with lending you the RM200; but I need it back by the 30th of June as my bills will be due then. Thanks.”
Don’t be afraid to ask. Many people are uncomfortable with asking for their money back but many a time; borrowers may take for granted that a quiet lender is a lender who doesn’t need to be repaid. A quick, simple call or message will suffice.
Be ready to write off. There may be a time when it gets too tiring to keep asking and though you love the borrower; the person may be a real flake with money. Consider if the relationship really is worth losing over money. The call is completely yours and if you paid close attention to the first few points; this part won’t be hard at all.
As a borrower
Sometimes the shoe is on the other foot. Borrowing from friends and family may not be the kind of thing you really want but you may find yourself without a choice. If so, do consider the following:
Have you tried every other formal way? Consider bank loans or even credit cards. Borrowing from a loved one or friend should be the absolute last option. Don’t take advantage of someone’s relationship with you.
Put your request in writing: Along with a date for repayment. Be disciplined and treat the lender with respect by stating your intention to repay and when.
Inform your lender if you have problems with repaying. If the date of repayment comes by and you don’t have the funds to repay: speak up and let the lender know. However, where possible, make returning this amount your priority.
Don’t take advantage. Just because a lender has been kind enough to lend you money once; it does not give you free reign to ask every time the need comes up.
Scrutinise your finances. If you’ve come to a point where you need to borrow substantial amounts from friends because financial institutions won’t lend to you; there is evidently a problem. Identify the problem and fix it.
This was brought you by Diana Chai from RinggitPlus.com. RinggitPlus compares credit cards, debit cards, balance transfers and personal loans to help Malaysians get more for their money.
