A Better Way To Lend Money To Friends & Family
Lending money to friends and family can be a strain on the relationship (not to mention your finances). Seeing that you’re doing well, everyone wants to hit you up for a small loan. If its a short-term thing its fine, but if you’re worried about the borrowers ability to repay your loan either due to poor financial responsiblity or income limitations it sometimes becomes difficult to say no.
One way is to steer them towards micro-finance sites like Prosper.com. Tell them that if they sign up on Prosper, you’ll contribute as much as you can towards their request and also give you a recommendation.
This helps you in several ways:
1. It doesn’t sound like you’re saying no. You’re trying to help them and will even
contribute towards their loan.
2. You get paid interest. This is based on their credit history. The better they’re
credit history, the lower the rate.
3. You don’t have to keep on asking them when they’ll repay you and they don’t have to avoid you because they feel like stiffing you. (Isn’t it amazing how people who don’t have enough money to repay you still seem to have enough money to spend on movies and fine dining?)
4. Their credit is on the hook if they don’t repay you. Even if you lose money, atleast they didn’t get away without incurring some loss. You don’t even have to bug them. Prosper will pass on the info to collections after a few months of non-payment.
Prosper is also currently running a promotion. If they sign up using the referral link, both you get $125. If they join your group, you get group rewards which can be a % of the loan and an ongoing % of the monthly payments! If you refer a lender, then you both get $25.
You can even borrow money from friends and family this way. If you need a small loan just sign up on Prosper and forward your request to your friends. The smallest amount they can lend you is $50. If your friends can’t lend you $50, you need to find richer friends or (more likely) to work on your image!
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August 10th, 2007 at 11:29 am
I think this is a good recommendation, but there’s another option I’ve used with great success.
Circlelending.com
I currently have substantial loans to both my Mother and Sister for car purchases. With Circlelending I never have to talk to them about the loan. If my family members have questions, they call CircleLending not me.
The monthly payments just get deposited in my checking account automatically.
One of the loans was initiated 3 years ago. The other just 18 months ago. No problems yet. I’m a happy customer & lender!