Martin Lewis, founder of UK financial advice website MoneySavingExpert, suggests that lending money to family is more than just handing over a sum and expecting repayment. This decision intertwines with affection, trust, a sense of obligation to help, and the risk of resentment if repayment plans falter. He advises lenders to consider potentially awkward situations from the outset, while both parties can still communicate openly.

Lewis suggests six questions to ask yourself before making a decision:

Are you under pressure?

If the borrower is pressuring you, making you feel guilty, or asking you to take out a loan on their behalf, do not agree immediately. According to Lewis, lending should be a voluntary decision. Taking out a loan in your name for another person's use is especially risky, as you remain responsible for that debt.

What if they cannot repay?

Consider the possibility of late payments, non-repayment, or both parties gradually avoiding the topic of the money. Can you accept such a loss? How will your relationship change if you repeatedly have to ask for repayment? These questions are easier to answer before transferring money, rather than once awkwardness has arisen.

Illustrative photo: AI

Can you afford to lend?

Having available funds today does not mean you will not need them in the coming months. Lewis advises reviewing your family's expenses, emergency fund, and future plans before deciding. Once you lend, you cannot assume your family member will repay the full amount exactly when you need it. If not recovering the money creates financial hardship for you, the loan may exceed your capacity.

Is there a more suitable way to help?

Providing money is not always the best solution. If your family member frequently lacks funds due to poor spending management, you could review their budget with them. If they are in serious debt, seeking debt counseling might address the root cause. The key is to understand why they need to borrow, rather than just resolving the immediate shortfall.

Have you agreed on repayment terms?

Before transferring funds, clarify the loan amount, when repayments will start, how much each payment will be, and the final repayment date. If you intend for this to be a recoverable loan, Lewis recommends documenting the agreement, especially for long-term loans. You should also be honest with yourself. If you know you will not demand repayment at all costs, determine if you are truly lending or essentially giving a sum with the hope of it being returned. Clarity from the start helps both parties avoid differing expectations.

Will this money solve the problem?

A loan can help a family member through a difficult period. However, if their income is insufficient or their debts continue to grow, the borrowed money might only postpone a financial crisis. Lewis advises asking yourself if this is the first of many future loans. If you still doubt their ability to repay or the loan's impact on your own life, there is no need to rush into agreement.

Nhat Minh (According to Metro)