Tag Archives: borrowing money

Knowing Whether or Not to Loan Money to Someone

At one point or another, most people will find themselves in situations where they asked for a loan. The person making this request may be a relative, close friend, or even a co-worker. Loaning money comes with its own risks and stigmas; what if the borrower takes too long to return the money? What if they can’t afford to pay back the loan? Worst of all, what if they simply choose not to?

Most people feel inclined to provide aid to those who are closest to them. However, there are still certain factors which should be taken into account prior to handing out monetary loans. Keep reading if you’re interested in learning more.

Consider the Qualities of the Person

Not every person who asks for a loan should be told yes. Hence why the qualities and characteristics of the prospective borrower should be taken into account before any funds are exchanged. Integrity, personal responsibility, and even current financial standing each play a role in how likely the individual is to, not only, return the borrowed funds, but also do so in a decent amount of time.

Another point to take into account is whether or not the asker has previously borrowed money from other people. If so, has he or she paid it back in a timely manner? Believe it or not, borrowing history tends to be quite indicative of an individual’s forthcoming habits, as they pertain to money.

Look into Creating a Legal Contract

While amounts of borrowed funds can vary, WikiHow advises lenders to draw up legally binding contracts; this especially comes in handy when hefty sums of money are being loaned. This can be done by having the borrower sign the contract and also ensuring that the document is enforceable via the Uniform Commercial Code (UCC).

Instituting a clear payment plan and eventually getting the contract notarized are also critical steps towards legalizing the form. Although going through the process of creating a legal contract may seem like a bit much to some individuals, it can truly come in handy later on down the line. Moreover, if a prospective borrower is unwilling to sign a legally binding contract, they may not be the best person to loan money to.

Trust Your Instincts

At the end of the day, each person is tasked with the decision of whether or not they want to loan money to a friend or relative who asks. Considering their qualities and characters can be incredibly beneficial, as can creating a legal contract; however, at the end of the day, your instincts should always be the determining factor.

No matter how good or trustworthy someone appears to be on paper, if your gut tells you to turn down their request to borrow money, do so. You are under no obligation to hand out loans; furthermore, you must first help yourself before you can truly help others.

A Final Word

Hopefully, the preceding advice will prove helpful to anyone who is undecided about whether or not they should loan money to someone they know.

 

Authored by Gabrielle Seunagal

How to Take Out a Loan

There are many people who will take out loans in their lifetime. There are many banks, online lenders, and additional financial institutions which have no problem issuing these loans. However, the reality which most individuals fail to understand is that loans almost always come with interest rates.

In other words, not only will people have to pay back the loans, but they will also pay for having to borrow money in the first place. For this reason, it is highly critical for individuals to tread carefully in regards to taking out loans. Thankfully, the following advice will certainly provide some much-needed insight.

Be Sure that It’s What You Truly Need

Virtually everyone stumbles upon a time or situation where they need to have money. However, being in need of funds does not necessarily mean that you should run to your nearest financial institution and seek out a loan. Sometimes, there are other available alternatives, such as dipping into savings or even asking a friend or relative if you can borrow money. However, not everyone has the aforementioned alternative; there are some cases where a loan from a financial institution is the most feasible solution for financial issues. Nevertheless, exhausting all options prior to taking out a loan is always best.

Come with the Necessary Materials

Individuals who require loans from financial institutions will have to complete an application and present official identification, as stated by Pocket Sense. After doing so, the hopeful borrower will also be mandated to show proof of their income. Of course, proof of income is required for the sake of the financial institution; before lenders loan money, they almost always ensure that borrowers have the financial means to pay the loan back, preferably within an allotted amount of time.

People who take out loans should also have a plan for payment. Proof of income is great, but on a practical level, this is not enough. Borrowers should map out exactly how much money they will put towards paying off the loan each week/month. This plan should also fit in with their budget, thus allowing the borrowing to cover their living expenses, put funds into savings, etc. If putting together a clear-cut payment plan is not possible, rethinking the prospect of taking out a loan may be a good idea. After all, fees and interest rates don’t care about personal circumstances or financial hardships.

A Final Word

Taking out loans comes with its own risks and setbacks. There are often many stipulations and strings attached which borrowers fail to realize until after the fact. For these reasons, taking out loans should always be done with extreme caution. Being truly sure that it’s necessary and having a very well thought out payment plan will make a considerable difference.

 

Authored by Gabrielle Renee Seunagal