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You’ve probably heard time and again not to lend money to family members or close friends.

The horror stories are plenty: at best, people say you shouldn’t expect to be paid back, at worst, it can destroy an otherwise positive relationship. This is the general wisdom, so of course, many of us avoid it altogether.

But what if a family member has been unemployed or has had health issues for a while? Or, what if you just want to, out of the goodness of your heart, help out someone you love?

I will not say you should never lend money to family members, but I will say protect yourself if you do.

Here’s how:

1.) Be sure that there is an understanding that this is a loan.

Everyone hears the word “loan” when they first ask for the money, but when it’s time to pay it back, they seem to recall hearing the word “gift” instead. Have a candid conversation with the person, make sure they understand that you are only doing this because they have had a difficult time and that you fully expect to be paid back.

2.) Get it in writing.

Document the conversation and set up terms for repayment before you hand over any money. Then, have them sign it.

You are at your strongest point before you give them the money and writing everything down will further enforce that you want to be repaid.

3.) Charge interest if possible.

If the person got a loan anywhere else, they would be paying interest, so why shouldn’t you charge interest? You can charge a lower rate of interest, but this will also provide incentive for the loan to get repaid sooner.

4.) Be prepared to stick to your guns.

As soon as the family member gets back on their feet or the repayment period starts, really follow up with them to receive repayment. Don’t take excuses and remind them of the binding document that they signed.

Special note: So many people are starting businesses now and that is great. If this is a loan for a business venture, then you should see a business plan. They should be able to show you where their business fits in the marketplace, how it will make money and initial steps (LLC filed, bank account opened, potential buyers sourced) and make sure they know that even if the business fails or takes a while to make a profit, you still expect to be paid back.

We all can use a little help now and then, follow these tips and you will be able to help without regretting it down the road.

Jennifer Streaks is a stylish moneypro and lifestyle expert and is a contributor for She tweets @JStreaks and her website is


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How To Lend Money To Friends And Family The Right Way  was originally published on