It has been said that you should never lend money to friends or family. Many people do not agree with that statement and there very well may be a scenario in which you agree to extend a loan. However, it is just as likely that you – for whatever reasons – don’t feel comfortable doing so. Here is some advice from Cliffco Mortgage Bankers on how to decline lending money to friends or family – hopefully without damaging the relationship.
Establish a blanket “no lending” rule.
It might be beneficial to let your family and friends know (in advance) that you never lend out money to anyone. However, once a decision like this is made, it is important that you stick to it. If you break your own rule and others get wind of it, they will undoubtedly feel hurt that you lent money to someone else and not to them. But if you live by the rule it will be viewed as a general decision rather than a case-by-case one that can feel personal.
Hear them out.
Perhaps even more important than the money that is being requested is the patience and understanding you exhibit during the conversation. After all, it takes a significant amount of pride swallowing for most people to ask to borrow money from their loved ones. So make sure you fully listen to their situation and their reasons for asking for the loan before you answer.
Don’t give an immediate answer.
It is not unreasonable for you to ask for one day to think before giving your answer. Your loved one should understand that it is a difficult decision that requires careful consideration, not to mention the fact that you may need to discuss it with your financial advisor and/or significant other. You can use this time to formulate a good response that is caring yet firm, and your spouse or financial advisor may be able to help you do so.
Help out in another way.
Explain that while you may not be able to help out financially, you’d love to provide some other assistance. Perhaps you can help your friend or relative update their resume, and then offer to pass it on to employers that you know. Or maybe you can provide them with a temporary place to stay. If money is indeed the only thing that would help, offer to give a smaller amount that does not have to be repaid.
Don’t leave room for negotiation.
If you feel strongly about not lending the money, make sure your response doesn’t sound wishy washy. Answer firmly and without too much of an explanation. If you make excuses, it may come across as if you will change your mind or that there may eventually be a way for you to do it.
For more lending and financial tips, visit the Cliffco Mortgage Bankers Know How Center.