How to Delicately Handle Lending Money to Family

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Are you in the enviable position of doing so well with your gig work that you can afford to lend money to a family member? While you are doing an admirable thing, both parties should enter the agreement carefully and lay out the expectations to avoid hard feelings later. You should also only agree to the loan if it is something you genuinely want to do to help a family member and not because of pressure from others. Lending money to family but you can find the right way to do it.

Start by Having an Honest Discussion

Before you consider lending money to family, remember that you are within your rights to ask the person several questions before handing over the funds. Here are some sample questions recommended by the financial website Penny Hoarder:

  • How do you plan to use the money? The answer to this question should be a practical one. Although you probably do not want to fund someone’s vacation, you may be fine with lending money to family to help them get through a rough patch due to unemployment or illness.
  • When and how will you pay me back? Avoid the temptation of being too lenient by telling your family member they can pay you pack when they are able to do so. Some people may take advantage of this generosity and claim they are never in a position to pay you back. Ask for a commitment to specific dates and amounts before making the loan.

If you are married or in a committed relationship with joint finances, you must include your partner in this decision. No matter how close you are to your family member or how much you feel for their situation, your partner should have equal say about the loan. You should also consider this person’s overall reliability, especially if you have loaned to him or her in the past.

Consider Appointing a Neutral Person to Keep Both Parties Accountable

Bringing another person into the loan arrangement can help to ensure that you receive your money back in a timely manner. The person can know both of you but should not have a much closer relationship with one over the other as that will make it challenging to remain neutral. Talk to your family member about this idea and get recommendations for whom you can ask to help oversee the loan.

Set Limits and Expectations

The best way to avoid having a family member take advantage of your willingness and generosity is to put the agreement in writing. The loan agreement between the two of you should include the following information:

You do not need to make the written agreement official, but the fact that it exists tends to make the borrowing party more aware of his or her obligations and take them seriously.


About the Author: Lisa Kroulik has worked as a freelance content marketing writer for 10 years. She loves the work and the lifestyle it affords. Learn more about Lisa’s work and availability through Writer Access.

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