Shakespeare said it best: "Neither a borrower nor a lender be." This is especially true of friends and relatives. Most of us out the hard way. I have successfully borrowed and lent to relatives, but I also have lost money, friends and communication with some relatives doing that.
If you really feel that you want to "loan" money to a relative, simply give it to them-in your own mind. Chalk it up privately as donating to a charity or making a foolish impulse purchase. If you do that you will not be upset if they don’t pay it back. Sometimes I will "loan" money and tell the borrower, "I don’t want this back. I do want you to pass it on to someone else when they need it and you can do it." That way they don’t have to feel like a charity case or embarrassed because they borrowed from you and avoid your presence. God will know whether or not they ever pass it on.
Ok, the question now is not whether or not to lend the money-that’s a done deal. The question is how to get it back! One family has a pretty good success rate in recouping loans. The Mafia breaks legs, arms and sometimes worse. It works!
Ok, you don’t want to break a leg. Ok, start with gentle reminders. "By the way-I’m running tight on the budget this month. Could you pay some of the money I lent you last _?"
"Man, I gotta put new tires on the car for that trip next week. How about you helping me out by giving me some of that money you own me." A little guilt might help motivate the relative.
Another, slightly stronger way is to sit down with them and work out a pay-back schedule. Many well-intentioned borrowers want to pay back, but feel they have to pay off in one lump sum, the way they borrowed. Asking them to work up a repayment schedule lets them know that a little at a time is ok with you and gives them some control and input about paying back. Depending on how well you know your relative, you might even add a small amount of interest. That may help them keep their pride.
If a relative seems to constantly need loans, ask him/her if he/she would mind if you help them with budget planning as part of lending them some money. This way, you could help them and yourself, because you could put in repayment to you as part of their bills! If they learn to stick to a budget they won’t have to borrow any more!
If a relative has borrowed more than once and hasn’t paid back, then write it off, along with them if you want to. Just remember, borrowing and lending is a two way street. You left yourself open for non-repayment by lending in the first place. (See paragraphs at the beginning)
Here’s hoping you have either been too smart to lend to relatives or that you have very dependable relatives!