Welcome back, everyone to Cheddar News. I Baker
and
I
do
and now to stretching your dollar,
sometimes we find ourselves in situations where a
friend or family member asks to borrow money.
It can be a situation that's fraught with tension and some serious ramifications.
But here to help us navigate this issue is Ted Rossman,
senior analyst with bankrate dot com.
Welcome back, Ted.
So if a friend or family member asks for a loan, you say, ok,
but is it OK to say no,
I think it is ok to say no.
I think we need to remember like they say on the airline,
put your oxygen mask on before helping others.
I mean, we wanna be helpful, we wanna be empathetic,
but if it's gonna jeopardize your own finances, it might be better to say no.
If it's gonna jeopardize the relationship, it might be better to say. No.
That's another thing. We found that
six in 10 people who've lent to family and friends
had something bad happen about four in 10 lost money.
About a quarter said the relationship was hurt.
About one in 10,
had their credit score damaged.
So I think you need to go into this with eyes wide open.
There might be some alternatives. Yeah, such a good point.
It doesn't seem like it ends well on most of the cases here.
But let's just say you do wanna help out what
are some things to maybe keep in mind here.
So maybe it does work out in your favor. Don't lend more than you can afford to lose.
Consider treating it like a gift too.
I think that's really important because alone really hangs over both parties.
I would say, you know,
you picture like you don't wanna sit down to Thanksgiving dinner with your banker.
I mean, it's just awkward. Your brother,
you're
when they're, you know, handing over the turkey and you're like,
you still haven't paid me yet.
Yeah.
So I think that if there is a real need there and if you are willing and able to help,
maybe consider treating it like a gift and don't expect to see that money again,
don't expect to see that money again.
Let's say you do want to see that money again.
What if is it smart to have something in writing like a contract of some sort?
It can help.
Now you're probably not gonna sue your friend or family member,
but at least there is the acknowledgement because that is something that we found.
Actually
sometimes people are like, oh wait, you expected that money back?
Like sometimes it's not clear.
So if you do write it out or if you are very clear about the parameters,
I still worry it could go wrong.
So I still say don't overextend yourself,
but at least being clear and communicative about the expectations I think is good.
And as the data points out there is a very real chance you're not gonna get paid back.
What's the best way to address that with that person?
We actually asked people if somebody owes you 100 bucks,
are you gonna follow up or not?
And it was exactly half and half in terms of people who would pursue it
and those who wouldn't, now, if you owe somebody
or if they owe you $1000 or $5000 you know, maybe then you're more likely to follow up,
um, for something like 100 bucks,
it's kind of a toss up if people are gonna chase it down.
I think it's important to be honest on the front end
just before you get into this and if you do have to tact fully follow up,
try not to hurt the relationship and maybe you send, uh,
an invite through Venmo or something like that
if they still don't like it.
Yeah, maybe you let it go after that. It depends. We have about 30 seconds left.
Any other tips, we should know when it comes to these personal loans.
I think we're gonna see more of this because sometimes it's
hard for people to get a traditional loan or credit card,
I think especially if the economy were to take a turn for the worst,
people would ask for more help, but just be open and honest about all of this.
All right, Ted Rothman,
good stuff. As always our friend, Ted Rosman over at bank rate dot com.
Thank you so much.