Personal Cash Loan Tips

Not every loan must come from a bank or other lending institution. Times exist when a personal cash loan between friends or family members is more appropriate than visiting a brick and mortar business. Unfortunately, mixing money and friendship can be a difficult task, even when a solid relationship is present. Whether you’re borrowing money or lending it, you can minimize the chance of friendship ending loans with five tips.

Written Contract

Borrowing $3,000 from a friend isn’t the same as using his lawn mower. A personal cash loan is a serious financial transaction requiring timely repayment and both parties should treat it as such. Putting all the specifics in writing not only solidifies your commitment to the deal, it allows no room for later disagreement about the exact terms. Make sure you include the loan amount, payments, interest rate – if applicable – and your notarized signatures.

Fair Interest Rate

It’s not just a good idea to offer a fair interest rate on personal cash loans; it’s the law. You can get an idea of the going interest rates for varying loan amounts by visiting lender websites, but keep in mind most banks must follow different rules than individuals. To ensure you aren’t charging a “loan shark” rate, find out the maximum legal rate allowed in your state and stay under it.

Responsible Repayment

Friends are often more forgiving during hard times than lending companies, but that’s no excuse for lax repayment. Treat the personal loan from a friend just as you would an obligation to any other lender. Always strive to make full payments on time, even when your friend tells you take as much time as you need. You don’t want to lose a friend over money.

Responsible Lending

If you plan to lend money to someone, make sure you can afford to be without the funds. Helping someone in his or her financial time of need is a noble deed, but overextending yourself is not the help your friend needs most. When you lend more than you can afford, you may begin asking for repayment every time you see your friend, straining the relationship. On the other hand, offering to help someone using money you don’t immediately need puts less pressure on you and your friendship.

Gauge the Relationship

Before lending money or accepting a personal cash loan from anyone, determine the nature of your relationship. Do you really know each other well enough to enter into a financial arrangement? Do you trust this person to repay the money? Are you comfortable owing money to some you know? If you cannot answer these questions in a positive manner, consider other loan options.

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