Lending money to family or friends is such an awkward, tricky position that most of us don’t want to be in, but unavoidably have to go through. Initially, you could just give them advice to look for banks or a licensed money lender in Singapore, but it’s usually not as easy as it seems. As much as you’d want to help out a friend or a family member, money issues oftentimes lead to tarnished relationships. However, if you really must, here are ways to go about lending them money in a smart manner:

1. Communication

Like any other financial institution, the first step in assessing whether or not to lend money is by knowing why the borrower needs it. Is it for an emergency or just to pay off irresponsible whims? Are you still willing to help out in case the answer is the latter? Help them out instead by discussing other possible options, such as giving advice on how to alter the lifestyle and money habits of the borrower. Other than borrowing money from outside sources, there might be other unexplored options that the person could get money from. It’s very important that both of you are honest about the situation and what your expectations are.

2. Refer the borrower to a financial institution

The first smartest option to help out the borrower is to refer them to a licensed money lender in Singapore. Here, you can be sure that they have low interest rates and more flexible terms as compared to the banks, all in a legal way. This is definitely one way to help out without the risk of tainting the relationship.

3. Deal only with cash

In the event that you decide to lend some money, only offer cash. Never allow someone to ask you to be their co-maker, or file a loan under your name, or be your supplementary cardholder. Once you do, you’re giving them the opportunity to smear on your credit line and reputation. To be safe, just lend cash, always.

4. Only lend what you can afford to lose

Painful as it might sound, this is as realistic as it gets. There’s a great amount of being “at ease” with family and friends that sometimes, we neglect our responsibilities due to them, knowing that there’s no urgency because they’ll always be there in the long run. This isn’t the greatest mentality; however, always prepare yourself for the worst. Only lend the extra money that you can afford to lose, and nothing more than that. As the popular airline safety rule states, “If travelling with someone else, put your oxygen mask on first before helping out another person with the mask.” Protect yourself first because you’ll never know, there might be nobody to help you out once you’re in a slump.

5. Get it in writing

This step may be daunting to some, thinking that it is irrational to create a written agreement between two parties that have an emotional bond. However, as a lender, this will serve as your protection; and for the borrower, will serve as a way to discipline - and that is for their own good. Be upfront and transparent on how you want the payment scheme to be; enforce a disciplinary or even a legal action in the event that the debt doesn’t get paid.

It’s always nice to help out a friend or a relative in need; however, we should always know where to draw the line. If you want to extend some help and expect it to be returned, you have to objectively assess the situation whether the borrower could pay you on your allotted timeframe or not. On the other hand, if you really want to offer assistance but couldn’t afford it, your best bet is to refer your friend or relative to a licensed money lender Singapore that allows customisable and flexible loans. That way, you’re able to help them get money quicker and they’re also able to pay their debts according to their desired schedule.