is lending to friends and family ever a good idea?

Have you ever considered a money lending business?

Many of us think that a money lending business is one of the most profitable and easy to manage business that we can start with.
but is this really true? is it really an easy to manage business or its just as difficult as any other business that we can start with especially when a friend or a family member is involved?

Well its neutral,  Lending to friends or family is a very special type of lending which requires people to overcome the intimacy of friends and family so that they can relate to each other like normal lenders and borrowers do. It would be difficult if you don't know the things to consider first before lending money to them as problems may arise especially in the collection part where they tend to forget their responsibility of paying you back because of this reason. On the other other hand, it could be easy to manage and be one of the consistently income generating business that you have if you do it just right.

So what are the things that we need to consider first?
Remember that you are doing this as a business and not a charity, so we need to look for the signs that we are likely to be paid back by those who borrowed from us.

here are the signs that you will likely to be paid back
-he/she pay previous creditors?
-he/she have a steady source of income?
-he/she is negotiating a better terms of payment
-he/she tells you whats he is going to do with the money
-he/she shows a payment plan (including dates)
If the borrowers show this signs, then you are likely to be paid back regardless of him/her being your friend or  family member.

Then you need to write down the terms (create a promissory note signed by both parties) and this includes:
name of the borrower
amount of loan
due date
date of transaction
interest rate
penalty if the borrower fails to pay

Remember to give only what you can afford to lose. You don't want to be chasing a borrower or a friend because his payment will be a part of your monthly budget. This will just give you another problem on your money lending business.