Today we will start a new video series all about lending money to family and friends.
So, We all know the old advice to never lend money to friends and family. It’s often just too messy. Is it really a loan or is it a gift? Are you going to resent if you see the borrower taking vacations or leasing a new car rather than repaying the loan more quickly? Will it ruin or help your relationship?
My advice, based on seeing things go sour with many clients is Make it mirror a real, financial-institution loan as much as possible. If you can take the emotional part out of it, it can keep the relationship intact, protect the lender and help the borrower. I will spend the next few days offering a framework to help guide lenders.
The first important concept is to Make it official: It is imperative that the arrangement is treated as an official financial commitment. The terms, interest rate, payment schedule and lender’s recourse in case of default should be spelled out in a contract that is signed by all parties. I further suggest to include independent attorney to draft the contract.
You can WATCH the full video here.