Think carefully before lending money to a friend or relative. You are not a bank, and because of this simple fact the person you loaned the money to may not feel obligated to return it. Relationships, whether familial or casual, come with the good and the bad. When money enters the picture, those same relationships can be stretched to the breaking point. Problems arise so quickly because each party has different ideas about the terms of the loan.
If you’re concerned that you won’t get paid back, then don’t lend the money in the first place. On the other hand, if the person who is asking for the loan is making it difficult for you to turn him or her down, do the same thing a bank would do if the requested amount is large. Say you want to take something of theirs as collateral. If you choose an attractive item, which the other person doesn’t want to lose, this will compel him or her to return the loan. This option probably isn’t used by many people, but it could work in your favor if things go sour and the money disappears forever.
Maybe you already have given some money to a needy friend, and you wanted to extend a helping hand. Or, perhaps a relative has applied pressure to get you to fork over some cash. It’s always harder to resist when this happens. In either case, you have the right to remind that person you need the money back. A simple e-mail, text message or phone call ought to be enough.
On the other hand, if a short message isn’t sufficient, ask for a date when the money can be paid. Don’t settle for vague assurances like ‘probably tomorrow,’ or ‘sometime next week.’ People love to procrastinate, especially when it comes to paying money they owe. They are fully aware somebody is going to be coming after them, and the instinct will be to put that task at the bottom of the pile. Be firm and assertive but not threatening.
The chances are good the person will dodge you as long as possible, or will attempt to cook up one sob story after another over the phone and in e-mail messages. Get a hold of him or her and have a face to face meeting. Ask why the money isn’t being returned. You might not get answers that are forthright. At this point it’s safe to assume you’ll never see the money again. Instead, some creative ways to get this debt repaid is to ask your friend to help you with little jobs. Let them earn it. Get them to help you with shopping errands, cleaning the house or car, and perhaps taking care of the kids if you have any. If the friendship means anything at all, then the person would likely agree to do these things. You can use this idea with relatives, too.
Another course of action would be to take the person to small claims court. However, bear in mind that the wheels of justice turn slowly. You would have to gather evidence that the friend or relative borrowed money and promised to give it back. There are no guarantees and you could be out of luck.
If the money is never paid and the friendship ends, chalk it up to experience. Not everyone is responsible with money and these people are the ones who will look to get a free ride whenever possible. Don’t hold it against family members who fail to repay personal loans. What can you do? It’s not sensible to try to coerce or threaten them. They will just avoid you forever. You’ll just have to forget about it and move on. If anything, this life lesson will teach you to lend money carefully in the future.