A lot of us have been approached by friends, family and loved ones asking to borrow money. This could be because they have had an unexpected cost arise or their earnings have taken a hit, or maybe because the cost-of-living crisis is more than they can manage. If you have the money to spare, you will probably want to say yes and help them, but there are some things to remember before saying yes. Lending money to friends can be fraught, but it pays to be tough if it means you don’t end up being taken advantage of. Here are some key things you should do to avoid losing out.
Be Clear on Terms
Before you go ahead and lend a friend money, be clear on the terms of the arrangement. It’s a good idea to have clear written evidence on how much is being borrowed and the terms of the loan, such as repayment schedule, and any interest rate. This will help to avoid any disagreements or misunderstandings further down the line. Both parties will know when and how the loan will be repaid from the beginning.
If you are worried about someone not repaying the money that you have lent them, ask for something to secure the loan. This is called collateral, and it’s there to ensure that you don’t miss out should the repayments fall through. If they are not able to pay you back, whatever the collateral is becomes yours.
Though you might not want to charge a friend interest – after all, if they are asking to borrow money, they are unlikely to have much money left to cover the additional cost – but it’s a popular way of encouraging your debtor to make regular payments. Knowing that falling behind on payments could cost them might be enough to encourage them to stay on top of things.
Enforce the Debt
Calling debt collectors on a friend might seem harsh, but sometimes getting your money back requires professional help. Getting the money back any way you can is more important than the friendship, especially if the friendship has soured due to the unpaid loan. Our team of face-to-face debt collectors collect any debt of more than £1000, so you can always rely on us to help.
At Cobra Financial, we have a lot of experience with chasing unpaid loans, including those between friends. If you have lent someone money and they are not repaying, our debt collection experts can step in. We have a wide range of techniques to chase debts, including visiting the debtor in person. Find out more by getting in touch with our expert debt collection agency.