Lending money to friends and family

Do you have friends and family asking you for money? While it may seem like a good idea to make a loan, it can create havoc.

Let’s consider the questions you should ask:

Will it ever be repaid? What are the repayment plans? You may assume the other party knows that loans are loans and are to be repaid. But do they? Are you using words like these: “Just pay me back when you can?”

If you both are not perfectly clear, you both could end up confused or forget that money is owed. Additionally, asking about repayment plans is a difficult conversation to start if the arrangements aren’t clear from the get-go.

Loans can strain relationships, especially if the borrower doesn’t repay or shows other irresponsible behavior, such as spending freely on recreation, electronics or other non-essentials rather than repaying the loan. It might become clear that the borrower doesn’t have the proper money management tools and knowledge to make good money decisions, and will soon turn again to you for more money.

If you decide to lend money, you either need to have a clear agreement on how the amount will be repaid or consider the money a gift and forget about it.

It’s also perfectly fine to tell them that it’s not in your interest — or their’s — to borrow from family or friends. Instead, you might suggest they contact us at First Utah Bank.