Today, we will continue our video series about lending money to family and friends.
The next point I want to cover is to Establish a repayment plan: A clear budget should be established by the borrower and shared with the lender. Every dollar of income should be accounted for—and should be used on nondiscretionary expenses, any debt outstanding and to pay back the lender. The repayment plan should include how much is due each month (or other agreed upon timing) and the due date; how the payments will be made (for instance, bank transfer, Zelle, Venmo, check or cash); and whether there is a grace period and how long it is.
For a family member who has ongoing overspending issues, the lender might want to include a clause in the loan agreement that requires a therapy component. A mental-health professional, can help the borrower deal with the root causes of their overspending and create a plan going forward.