If you decide to lend money to a family member or friend be prepared to not get the money back.
What I've discovered over my 20 years as a financial planner is, if the loan isn't repaid it can cause serious harm to a relationship.
There are things to consider before you loan someone money.
Decide if you can afford to help. Make sure you won't put yourself in a bad situation by not having that cash available. Get your spouse's or partner's approval. Lend only what you can afford to lose. Put the agreement in writing and have it signed and notarized. Charge interest. If you’re making a loan and aren’t planning on charging interest, you may want to reconsider. Any interest you waive can be considered a gift to the debtor by the (IRS) and subject to tax if that amount plus any other gifts you made to that same person exceed $14,000.
Bottom line when you lend money to someone understand that you might not get repaid, and are you OK with that?
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