Why Lending Money To Family Members Is A Horrible Idea

Family is for life and good friends are intended to be there for the same period of time; however, when money is involved these special relationships can quickly fray and become irreparably damaged. There is a reason banks and lenders are often times hated and that is because, when required, they assume the role of the bad guys when money is owed. Banks repossess homes, auto dealerships repossess cars and property owners evict tenants. When this same relationship develops between family or friends, and the promises to borrow and return are not kept, the ugliness that normally would occur with a professional loan relationship sets family ties on fire.

A major problem with lending money to family and lending money to friends is that the no neutral party to delegate the money owed between the lender and the borrower. Emotions are involved and when a party fails to return a payment, emotions return and the necessity for professionalism is often stripped from the equation. Sometimes the application a professional approach is then misconstrued as cold hearted because the arrangement was made with a foundation of emotions than a foundation of contractual obligations. This is just a small example of why lending money to family members is a horrible idea.

There is an extreme risk in lending to family and friends. Unlike banks and other lenders, family and friends that borrow from family friends expect understanding. When repayments are short, late, or nonexistent, there is a constant expectation for an exception to the rule. This becomes a bad habit and debts owed become debts delayed and eventually debts forgotten. This process is extremely frustrating for a lender and not realizing that the debt would not be paid sooner, or ever, leads to a great deal of resentment. A lender feels tricked and taken advantage of. This is the way most family to family or friend to friend loans develop, progress and end. It is best not to put oneself at risk for such a great deal of destruction to a bank account and a relationship.

When family and friends are in a bind, understanding is enough. Do not expose a relationship and a wallet to times of financial strife. There simply is no anecdote to this type of poison. Provide guidance in how to obtain assistance if obligation tugs at the conscience. Many people are in the same situation and need to find ways to cope with financial trouble. Resources are available but family is more convenient.