Choosing the right persons for loans is something substantial, as it can strongly influence relationships and financial stability. There are three factors to consider when lending money to an individual, as it is in this case, a borrower; financial responsibility, communication and repayment history. Looking into these can make a great step before giving out your money as things may not be as you expect later.
I watched a programme some days ago about two friends. One of them sued the other in court and the issue was that of money. For the sake of this article, let's give them names; Sarah and Jenna. Sarah borrowed Jenna some amount of money which was #150k ($100+) and refused to pay it back after six months which already exceeded the agreed date. The money was to be used for Jenna's engagement where she needed money to get Asoebi (engagement attires) and she hoped to get back the money from her husband to be or when they spray money at the event, but things took another turn when the fiance cancelled the engagement and ran away. Jenna already bought the clothes and distributed them to other friends and neighbours who wanted to get the materials but refused to pay her.
She was devastated because of this incident and Sarah also sympathised with her for a month, she expected her money but Jenna started dodging and ignoring her calls. When the matter was taken to court, she had to tell the judge that Sarah could have forgotten the money for the sake of friendship because she knew she had lots of money to spare the loan for her.
You can imagine such a statement from Jenna, right? That was unfair of her because Sarah only loaned her for the sake of friendship and also needed money which she could have paid back but didn't.
In situations like this, trust is paramount, but in another way, it is important to be cautious as it is equally vital to avoid pitfalls.
Financial transactions between family and friends can be a delicate one which often strains relationships if not handled carefully. There is a common phrase that says, "Be careful who you loan money to" as this represents the wisdom of recognising the potential effects of financial arrangement.
The first thing a lender must look into is the borrower's financial habits and history. According to Sarah, it wasn't the first time her friend would be borrowing money from her which could take time to pay back but her friendship level had blinded her not to see the lapses and future occurrence. A lender must be able to follow through and observe the habits of a borrower in terms of finances in order not to fall into pitfalls. When a borrower is always consistent with the payment of a loan and also pays on time, that is a safer bet for the lender. On the other hand, lending money to an individual whose financial record is very low and isn't consistent or timely with repayment of a loan, is a red flag which should send the lender off immediately.
Another essential aspect to look at is the effective communication of both the lender and borrower. There should be clear and open discussions of when to pay back loans, repayment terms and potential challenges, as this can prevent misunderstandings. Both parties must be on the same page with repayment schedule, interest rates (if there would be) and also laying down the potential consequences for missed payments. Establishing these terms beforehand would help to prevent or avoid conflict that may arise later.
Most importantly, a lender should be able to distinguish between a loan meant for genuine needs and those driven by frivolous desires. With the above scenario, I wouldn't agree that one should borrow money for an event like an engagement because one should be able to raise such finance. Going to a marriage with borrowed money is wrong, especially with the expectation to accumulate it back through spraying at parties as things may not go as planned eventually. Assessing the purpose of a loan would give a lender an insight into the borrower's financial priorities. Responsible financial behaviour is when one can give a well-thought-out plan for the use of funds.
When it involves money issues, even close relationships could be strained. It is necessary to weigh the impact of the loan on a relationship and be prepared for future changes. In addition to this, it is crucial to have a written agreement which can formalise the arrangement and provide evidence in case any issue arises. What should be included in the written agreement would be;
In conclusion, loaning money to an individual can be an act of trust, and while it is so, one should still be pragmatic. Recognising and being observant with warnings, setting clear communication and realistic expectations can help to navigate the complexities of lending. While being cautious about whom you loan money to can be a financial consideration, it is also a strategy to preserve relationships and financial stability.
Both images are designed on Canva
