“Neither a borrower nor a lender be. For loan oft loses both itself and friend.” – Shakespeare

If you have ever lent a private loan to a friend or family member, you likely understand this saying. A recent study proves that 69% of Americans have lent money to friends or family. Of those, 44% have had a bad experience like losing the money or damaging the relationship.

How to Get Paid Back for Friends and Family Loans?

If you find yourself in a situation where you have to lend money to a friend or family, get yourself in the right place before you lend. Otherwise, you will end up losing the money and damaging the relationship. Below are a few tips to improve the odds of being paid back.

1. Lend to Someone You Can Trust

Lending money is good if you are sure that it won’t damage the relationship. So, be selective about who you lend the loan to. This will increase the chances of getting paid back.

By giving loans only to someone whom you can trust with repaying your loan, you can save yourself from future financial and emotional stress. And if you don’t trust the person, it’s always okay to say that you are not comfortable with lending money to friends and family.

2. Document Your Agreement

Have a paper trail when you are going to lend friends and family business loans. This will help avoid any misunderstanding between the lender and the borrower. Create terms and conditions that you and the borrower can agree on.

This is important if you are lending a huge amount of money. Also, you can sign a loan contract that will make your duties clear and provide you with legal grounds for action if you have to sue the borrower in the future to get your money back.

3. Create a Payment Plan

If the loan amount is something you must have back, you should create a proper payment plan in writing. It will give you the opportunity to pursue the funds in a more formal way. Make sure both parties are in alignment on this one.

How the money is going to be repaid? Is it going to be repaid in a single installment or small installments? Are you expecting weekly payments or monthly? The plan should clarify such key aspects of the repayment.

4. Don’t be Afraid to Barter

If you’re having trouble getting repaid, consider alternative forms of payment, such as bartering. Depending on your relationship, bartering can be a middle-of-the-road solution. It will surely help you put the debt behind you and restore the relationship. For instance, you can use their skills or assets in exchange for writing off the debt.

5. Be Direct

Being direct means establishing clear communication before you make the loan and while you wait for it to be paid back. Avoid being passive-aggressive or making snide comments if you see your friend in public. Just be direct with what your expectations are.

In Conclusion

Obtaining a traditional bank loan can be difficult for borrowers with a low credit score. If that’s the reason why they’re asking you for money, you should direct them to a flexible lending/borrowing platform like Janji-Ku – a mobile app designed to simplify the process of friends and family business loans.

Download the app now!