Here are some interesting ideas on when to lend money and how to get it back.
When not to give
Remember, it is your money. You have a right to know why it is being borrowed. Don't lend if your
friend would rather keep mum on about the reason/s why he needs it.
If it is to pay up his credit card debt or personal loans due to his frivolous lifestyle, back away. If he has been living above his means, it is not your obligation to bail him out.
Ditto if it is to finance a club membership, a home theatre, a car or even a vacation (no matter how long awaited).
Secondly, if a friend or relative is borrowing it, chances are they will not be paying you any interest -- the money you loan is not being invested or even saved. At the very least, they owe you an explanation.
When you may want to give in Don't just give in because of your warm heart. Do so because of the situation at hand.
If it is a sudden illness or calamity, then you should consider. After all, what are friends/ family for?
Maybe your friend needs some financial assistance to get a management or a professional degree. Or maybe even to buy a house.
In such cases, ask yourself a few questions.
Do you have the money to spare? Or will you be asking your parents or spouse for it?
Will
giving the money cause a rift in your family?
Has your spouse agreed to your giving the loan?
Will your family have to make sacrifices if you lend this money?
You must also make allowances for slip-ups.
Are you ready to lose the money? Writing if off as a gift is one thing, but will you resent your friend for it?
Can you afford to lose it? You may want to, but does that mean you will have to cut corners at home? Will your family suffer?
Even if you do eventually get your money back, are you prepared for a long wait? Do you realise you will only get back the principal -- no interest or any other additional money? And when you get it back, the money will be worth much less because of inflation.