Is It A Mistake To Lend Money To Family Or Friends?

In a financial pinch, turning to friends and family for a little financial help seems like a good option. After all, what could go wrong?

Plenty.

Many people have horror stories about personal loans destroying and ending relationships. It would be challenging to find anyone who hasn’t seen the effects of what money transactions between family and friends can do to relationships.

Let’s take a look at why lending money to family or friends is not a good idea. And what to do if you decide to anyway.

Why Personal Loans Create Problems

According to a 2017 Federal Reserve Board report, almost 40% of Americans couldn’t cover an unexpected $400 expense. It’s no surprise that when something happens, these people may ask friends or family members to lend them money.

When people need financial help from the people they are closest too, there’s usually a reason behind the need. Perhaps, the individual is having difficulty budgeting their money. Maybe they lost their job or had an extraordinary emergency putting a tremendous strain on their finances.

It’s also entirely possible they have a questionable credit history making it nearly impossible for them to find access to credit in other forms.