Have you ever loaned money to a family member before? If so, rest assured that you are not the only person in such a situation.
In fact, many people have helped family members with the expectation that they will be reimbursed. The sad truth here is that you may never be able to see that loaned money again. What’s even worse is that your relationship with this family member could be damaged.
Here are some common reasons why you should never lend money to your family..
It can hurt your finances
Your relationship with your family is never the only thing that suffers when you loan them money. Your credit and bank account can also be seriously affected.
As mentioned earlier, there’s a good chance you’ll never see this money again. Because of your close relationship, your family member might view the money not as a loan but as a gift.
Even when they know it is a loan, they may think they don’t need to pay it back, or at least not right away. While this might not be a problem with smaller loans, your future plans and savings could suffer if larger amounts are at stake.
It can cause tension in relationships
Unfortunately, lending money to family can damage or alter even your most special relationships with them.
Whenever you lend money to a family member, the borrower may be less inclined to view the loan the same way they view loans from banks and other lenders. The two parties involved might have different expectations which might not end well for everyone involved.
Money can complicate relationships and there are times the damage can get too much to deal with. The tension in the relationship might even sever it completely.
It can encourage bad financial habits
There are times when lending money to family isn’t really the best help you can give them, especially if they’re struggling to manage their finances. While it may provide a short term solution, it will never solve their long term problems.
While you might need to give them a hand with repairing their roof, for example, and a loan could do that, you would want them to develop healthier and better financial habits. When they know how to manage their money, it reduces the chances of borrowing becoming their permanent solution while also protecting your relationship with them.
You might also need money
If you have money to lend to a family member, you may already have plans to use it for something. It could be part of your savings or emergency fund. Always think about your own finances before lending to someone, family member or not, especially if the money is already allocated for your personal needs and goals. As far as you know, you might not really have the cash on hand to complete in the first place.