A few weeks ago I wrote about lending money to family members. While I am out of the office working on an upcoming case, I am reading a book called Get Money (by Kristin Wong).
It’s a good book for people to improve their relationships with money. Ms. Wong has written a blog for years and took some of her best advice and put it all in a book. Instead of a traditional “how-to” type of book, she presents her advice in 3 stages:
- Power Up
- Optimize
- Grow
Lending Money to a Friend
In the chapter on relationships and money’s effect on them (“Level Five”), Ms. Wong discusses loaning money to friends. Similar to my blog on loaning money to family members, she recommended a few steps when lending money to friends:
- Make an Actual Contract
- Add Interest
- Set a Clear Deadline
These are all good things to consider, especially the need for a contract. Adding an interest component and being clear on a deadline for repayment are both important terms for the contract. In addition to the deadline for repayment, I also suggest that you have a clear repayment plan in the contract. If the payments are going to be made monthly, quarterly or yearly, make sure it is clearly spelled out.
Final Advice
Ms. Wong had one final piece of advice that you should also note:
Finally, if you’re the one lending, it’s probably best to follow one final rule: don’t expect to get the money back in the first place. This will keep you from lending more than you can afford to lose, and while you should still set up some ground rules, it will help you prepare for any unpleasantness down the road.
Next Steps
If you’re thinking of loaning someone money and need a contract drawn up or, if you’re already ahead of the curve and have put something together yourselves and just want an attorney to review it, call my office to set up a meeting and we can review the best options for you – (877) AMAYERS.
