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Letters to the Editor

Lending money to relatives and protecting relationship

May 26, 2024 00:00:00


With interest rates climbing, more people are turning to family for financial support. While lending money to a loved one can provide much-needed relief, it also carries the risk of damaging the relationship if things go awry. Fortunately, there are ways to minimise these risks and ensure that both parties feel secure and respected throughout the process. Before any money changes hands, have an open and honest conversation about the loan. Discuss the amount needed, the purpose of the loan, and the repayment terms, including the repayment schedule, interest (if any), and what will happen if the borrower is unable to make a payment. Clear communication from the start can prevent misunderstandings and resentment later on.

Formalising the loan with a written agreement can protect both parties. A written agreement should include the loan amount, repayment schedule, interest rate (if applicable), and any other pertinent terms. This document serves as a reference that both parties can return to if there is any confusion or dispute. Various online tools and templates can help you draft a legally sound agreement. Several tech tools can help manage personal loans, ensuring that repayments are tracked and reminders are sent automatically. Apps like Zirtue, LoanWell, and Splitwise offer platforms for tracking payments, setting up automatic reminders, and even facilitating the transfer of funds. These tools can help maintain a professional approach and reduce the emotional burden on both sides.

Before lending money, consider your own financial stability. Ensure that lending the money won't put you in a precarious financial situation. Lending money should not compromise your ability to meet your own financial obligations. If it does, it might be better to offer non-financial support or help your family member find alternative funding options. Address the uncomfortable topic of what will happen if the borrower cannot repay the loan. Discuss if the loan could be converted into a gift under certain circumstances or if there would be an alternative repayment plan. Having this conversation upfront can save heartache and conflict later on.

By communicating clearly, formalizing the agreement, utilizing tech tools, and setting firm boundaries, you can lend money without jeopardizing family ties. Remember, the ultimate goal is to provide support while maintaining the integrity and health of your relationship.

Nargis Sultana

Assistant Professor

Department of Finance & Banking

Comilla University, Cumilla, Bangladesh

[email protected]


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