Can you protect yourself when you loan money to friends or family?

I believe people who feel close to each other always want to take care of each other. That includes when financial problems hit. So the question comes up often if the lender can protect themselves if things continue to go bad. I found this article that discusses the best way to protect yourself if you are going to lend money to friends or family: "The Best Ways to Loan Money to Friends and Family." It has a few good ideas:

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"1. Set a Fair Interest Rate [state law may regulated how much interest you can charge]

 2. Get Your Agreement in Writing [it can be simple]

 3. Set up a Formal Payment Arrangement"

I would add that once you establish the agreement, enforce it. If you start to let it slide, you could imply you waived the right to collect it. Also, the longer you let it go, the harder someone may take it when you remind them they need to pay.

You also need to do some of your own homework. You need to ask yourself if this is really helping or just prolonging a problem. Because this will not protect you if someone file bankruptcy. You will be added to the list of unsecured creditors and your debt will be discharged along with the other creditors. Check out the article I wrote last month: Bankruptcy - The gift that keeps on taking ...

But if you are confident you are helping out, these are solid step to take to protect everyone involved.

If you want assistance, legal representation, or just want to know more about Mark Medvesky or Medvesky Law Office, LLC, check out our website at www.medveskylaw.com.

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