To put it plainly, it’s impossible to deny the affection you hold for your family and friends. Typically, you’d go out of your way for anyone significant to you, providing moral and emotional support in instances ranging from medical emergencies to reconstructing their house or lending an ear to their thoughts.
Nonetheless, there’s a good chance you’ll encounter a situation where a loved one approaches you for financial aid. Initially, you might be tempted to quench their needs, given that helping a person you care about seems like the obvious choice.
Regrettably, financial transactions between acquaintances and relatives can often lead to undesirable outcomes. Even under the most favorable conditions, lending money might breed complications you haven’t imagined. Thus, prior to committing to lending money to people close to you, it’s advisable to ponder on these six potential downsides:
1. DELAYED OR NO REPAYMENT
When you get a traditional loan, a contract ensures your commitment to monthly repayments. If you lend money to friends or relations, chances are you won’t establish a binding agreement. In the absence of a formal contract, the impetus to repay your loan might be diminished. It’s worth noting that the probability of non-repayment is often quite high, so it’s crucial to determine your comfort level with potential losses.
2. CREATION OF AWKWARDNESS
Whether you’re the borrower or lender, subsequent interactions may become uncomfortable. If the loan isn’t promptly paid, it becomes a persistent issue, contributing to tension-filled encounters. Moreover, the borrower might feel obliged to conform to the lender’s wishes, intensifying the unease. In addition, if others are privy to the loan, it might put you in a position of receiving similar requests.
3. REPEATED REQUESTS
Targeted individuals might be prompted to ask for additional funds. They might perceive your initial act of kindness as an indication of pending support, ultimately creating an inconclusive routine. Remember, a polite refusal from the start might save both parties from developing harmful patterns.
4. PROMOTION OF BAD HABITS
Potential borrowers with a history of financial mismanagement might turn to you when conventional avenues fail. In such scenarios, lending money might inadvertently fuel their reckless behaviour. Instead of providing a loan, guiding them towards financial responsibility and finding alternative income sources might be more beneficial.
5. FINANCIAL STRAIN
Even if you’re financially secure, lending money may still present implications. Unforeseen circumstances may occur where the money could be beneficial, amplifying your financial pressure. Thus, it’s paramount to expensively weigh your own financial needs before assisting others.
6. RELATIONSHIP RUPTURE
Regardless of the circumstances, lending money can instigate stress and disagreement. Potential conflicts might arise due to differing viewpoints, delayed payment, or your own financial needs. Regrettably, these disputes can tarnish your relationship with your loved one, necessitating cautious consideration prior to providing a loan.
Turning down a loved one when they’re in need can be challenging, but it’s important to account for the potential ramifications on your relationship. Lending money might seem inconsequential initially, but it can breed unforeseen conflicts and strain relationships in ways that might not be worth it. So, it’s wise to give it enough thought before issuing a loan.
Have you seen a loan to a friend or family member sour? What sort of repercussions did you encounter?