Giving money to family or friends can be uncomfortable, and it can sometimes strain or even destroy the relationship. But it's becoming common in this tough economy.
We've all encountered this problem. A friend or family member comes to you with their hand out. It's not always cut and dry on how to handle it. You've heard the old adage, money and friendship don't mix. But with millions of Americans hurting financially, and banks tightening their lending, you may find it hard to say no to someone close who's in need.
Certified Financial Planner Ken Robinson says, "People just want to help their loved ones and their friends, and they don't want to think through, sort of from the analytical standpoint."
Whether you're asked for 50 bucks or five thousand, it's important to stop and think about your finances first. "If you can't afford it, you shouldn't do it," says Robinson.
If you do lend, draw up a formal agreement that clearly states the terms of repayment. "You should actually have a written promissory note that's signed and notarized," says Robinson, "so that the person knows that this is a formal loan arrangement."
So is it polite to say no, or ask your borrower to pay up? The experts say yes to both. The loan may be a personal favor, but it's still business.
Click here for more tips on giving to family members.