In most families and houses, you will always find that speaking about money issues and loans look something like a taboo, and you realize that this is so for good reason. As money can sometimes create resentments or misunderstandings within family members and even end up breaking into homes.

Often a time, you find that family members lend and borrow money from each other. But as the family member who is doing the lending, it is always advisable that you do your homework before you hand over any cash. That is if you don’t plan to have back and forth quarreling with the family member/s you lend your money to. For one, lending or borrowing money from family members can cause significant damage to both the borrower and the lender’s personal relationships. This depends more on how the loan is handled and what kinds of exceptions have been put into effect by the lender and the borrower.

Family loans are very different from the usual loans that you can get from lenders like www.lendgreen.com.

But family loans aren’t always all bad. In cases where the loans are paid back carefully, and in full, you find that everything always ends up well and care is given through the whole repayment process, then the relationship remains stable. It might even improve the issue.

So, unless you consider the loan to be some form of a gift, you need to be ready for some family drama should you fail to pay back the loan which you took. But you can help get yourself from such situations by trying out these four steps which might help prevent your family loans from turning into fisticuffs.

1. Review your own finances first

Before you decide to seek financial assistance from a family member, you need to view your financial situation and understand the position you are in and whether you really need the financial help or whether you can do without it. And if you are the lender, it would be wise that you do the same. As you won’t also want to lend out money only to find out later that you needed the money you just lent out to a family member. Figure out how your lifestyle can be impacted by the lent amount and whether you can still live comfortably even after you loan out the amount. Then, you also need to assess the situation of the family member borrowing the money from you. Whether he/she can and will, indeed, return the money, in full, and within the stipulated timeframe.

2. Ask ‘why?’

As the lender, you also need to know the reason why the money is being borrowed. What it is going to be used for. In most cases, you will find that the conversation might end up changing, depending on the reason/s why the family member is seeking out the loan from you. Other situations may also require you to dig deeper into where and how the borrowed funds are going to be used. For example, when the borrower is looking to start a new business venture. You need to be sure that the money is going into a business which is going to bear fruit and not fall or run into debt at the end of the day which will mean ‘there goes your money.’

3. Discuss the loan terms

Both the borrower and the lender need to discuss the loan terms of the loan and where necessary, even put some of the terms and agreements in writing so as to make it more official and binding. It might also be a good idea to include some form of security or collateral in the agreement to motivate the borrower to repay the loan faster.

4. Formalize the loan

If you are serious about getting your money back, then it is best that you put the whole agreements between you and the borrower in writing and have all the agreements signed and consented to. A binding contract makes the whole thing binding and formal. You can rely on this form should the borrower fail to repay the loan.