Lending money to friends and family can lead to financial problems for you and potentially cause relationship damage. Creating boundaries for loans to friends and family can help preserve relationships and minimize the potential for problems.
There is nothing wrong with loaning money to family and friends and helping them out. In fact, helping others out and being generous should be part of the way you live your life. However, it has to make sense for you and should not derail your financial goals.
As Shakespeare wrote, “For loan oft loses both itself and friend.” If you lend money to a friend or family member, beware that you may not get your money back and your relationship may never go back to normal. This will cause tension between you and the borrower, and may also cause guilt, remorse, and anger.
A study found it ends badly almost half the time. If the borrower doesn't repay, you can lose your money and damage an important personal relationship. Lending money to a family member or friend is a risky proposition, one that could end very badly. You could lose your money and wreck an important relationship.
The main reason to not lend money to someone is that you may not get it back. If someone asks you for money, it may be they haven't handled their own finances wisely and/or a financial institution won't give them a loan. ... According to one study, 46% of people who lent out money said it didn't work out well.
Nothing in the tax law prevents you from making loans to family members (or unrelated people for that matter). However, unless you charge what the IRS considers an “adequate” interest rate, the so-called below-market loan rules come into play.
Also, non-institutional loans (from private individuals, including friends and family members) are not eligible for tax deduction under Section 80C. That is, you will not be able to claim tax deduction on the principal. But then, unlike a friend, a bank will never lend you without interest or at a discount.
While the Bible does speak of lending money in a positive light, it also gives warning to not lend at interest to those who are poor or who are unable to repay. It speaks of lending freely, but it warns us against being greedy, and exhorts us to act with justice.
Structure Family Loans
How to say no when family or friends want to borrow money
noun. The definition of a beggar is a person who asks people for money or gifts to sustain himself, or is a person who is extremely poor. An example of a beggar is someone who stands on the street corner with a sign asking for money.
Do you lend money to your friend? Give reasons.
...
Solution.
| Yes | No |
|---|---|
| A friend in need is a friend indeed. | If the friend fails to repay the money, the friendship can go sour. |
| My timely help will earn me his trust. | The friend might misuse my trust and misspend my money |
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